When Economists Propose Taxes as a Way to Balance Out

question 38

Multiple Choice

When economists propose taxes as a way to balance out the presence of externalities,they try to propose taxes:

• A) on the action that creates the externality, rather than the externality itself.
• B) based on the externality itself, rather than the action that creates it.
• C) on what is simplest to implement.
• D) on what will likely generate the most revenue.

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Definitions:

AASB 137

The Australian Accounting Standards Board standard that deals with the treatment of provisions, contingent liabilities, and contingent assets.

Future Operating Loss

A projected loss from future operations, not yet incurred or realized, often considered in impairment assessments and going concern evaluations.

Deferred Liability

A liability that is recorded on the balance sheet and represents a future obligation to pay, such as taxes payable in the future.

Contingent Liability

A possible obligation that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the company's control.