If a Negative Externality Results from the Refining of Oil

question 123

Multiple Choice

If a negative externality results from the refining of oil, the cost of production as seen by the oil refinery:

• A)​does not include the external cost.
• B)​includes the external cost.
• C)​does not include the external benefit.
• D)​includes the external benefit.

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Definitions:

Protective Tariff

A tariff imposed to protect domestic industries from foreign competition by increasing the cost of imported goods.

Free-Trade Zone

A designated area within a country where goods can be imported, stored, processed, and exported without the intervention of customs authorities.

North American Free Trade Agreement

An agreement signed by Canada, Mexico, and the United States, creating a trilateral trade bloc in North America aimed at reducing trading costs, increasing business investment, and helping North America be more competitive in the global marketplace.

Tariffs

Taxes imposed by a government on imported or exported goods, often used to protect domestic industries against foreign competition.