Figure 10-7 -Refer to Figure 10-7. to Internalize the Externality in This

question 284

Multiple Choice

Figure 10-7
-Refer to Figure 10-7. To internalize the externality in this market, the government should

• A)impose a tax on this product.
• B)provide a subsidy for this product.
• C)forbid production.
• D)produce the product itself.

---

Definitions:

Consumer's Surplus

The gap between what consumers are prepared and capable of spending for a product or service and the aggregate sum they end up paying.

Earplugs

Small devices inserted into the ear canal to protect the ears from loud noises, water, foreign bodies, or excessive wind.

Utility Function

A mathematical representation that ranks individuals' or consumers' preferences for a set of goods or services, indicating satisfaction levels.

Reservation Price

The maximum or minimum price a buyer is willing to accept or pay for a good or service.