When Government Corrects a Market with an Externality Present by Allowing

question 57

Multiple Choice

When government corrects a market with an externality present by allowing participants to buy up to the point where their net benefit is zero,they must be:

• A) imposing a tariff.
• B) offering a Coase tax.
• C) mandating a quota.
• D) imposing a tax.

---

Definitions:

Time Premium

The portion of an option's price that exceeds its intrinsic value, representing the value placed on the remaining time until expiration.

Preferred Shareholders

Preferred shareholders are investors who own shares of a company's stock with preferential rights over common stock, particularly in dividend payments and upon liquidation.

Common Shareholders

Individuals or entities that own shares in a corporation, giving them rights to dividends and a say in company matters through voting.

Bondholders

Individuals or institutions that hold the debt securities issued by corporations or governments, thus lending them money in exchange for periodic interest payments and the return of principal at maturity.