Taxing the Externality Itself to Correct a Market

question 119

Multiple Choice

Taxing the externality itself to correct a market:

• A)is likely the best solution possible.
• B)can be unattainable.
• C)can be extremely difficult.
• D)All of these statements are true.

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Definitions:

Excise Tax

A tax directly levied on certain goods, services, or activities, such as tobacco, alcohol, or fuel, usually to discourage their use or generate revenue.

Short Run

A period during which at least one input (e.g., plant size, technology) is fixed, and firms can adjust only the variable inputs (e.g., labor).

Excise Tax

A tax imposed on specific goods, services, or activities, often included in the price of items like gasoline, alcohol, and tobacco.

Tax Wedge

The difference between the amount a buyer pays and the amount a seller receives for a good or service due to taxation.