A Corrective Tax Equal to the External Cost Imposed on Third

question 143

Multiple Choice

A corrective tax equal to the external cost imposed on third parties levied on polluters will:

• A)​eliminate all pollution.
• B)​increase the level of pollution.
• C)​force polluters to internalize the external cost resulting from their actions.
• D)​usually have no impact whatsoever on pollution levels, but will generate tax revenue for the government.

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Definitions:

Consumption

Consumption involves the use of goods and services by households, constituting one of the primary components of economic activity and a key indicator of economic health.

Income

The monetary payment received for work or through investments, pensions, or subsidies, which is used for consumption and saving.

Utility Functions

Mathematical models used to represent an individual's preference ordering over a set of alternatives, based on the level of satisfaction or utility.

Fair Allocations

Distributions of resources or goods among individuals in a way that is considered equitable or just, often taking individual needs or contributions into account.