An Emissions Tax (Imposed on Each Unit of Pollution Produced)that

question 61

Multiple Choice

An emissions tax (imposed on each unit of pollution produced) that is set too high to achieve allocative efficiency will cause

• A)too few resources to be devoted to pollution abatement and too little of the product to be produced.
• B)too few resources to be devoted to pollution abatement and too much of the product to be produced.
• C)no change in the polluting firm's behaviour.
• D)too many resources to be devoted to pollution abatement and too little of the product to be produced.
• E)new firms to enter the industry.

Understand the differences between regulation, taxation, and market-based solutions in managing externalities.

Recognize the importance of the optimal tax level and its impact on correcting market inefficiencies.

Understand the concept of externalities and how they affect social costs and benefits.

Calculate the social cost of producing goods in the presence of external costs.

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Definitions:

Elimination

The process of removing intercompany transactions when consolidating financial statements of a group.

Consolidation

The process of combining the financial statements of multiple subsidiaries with those of the parent company to present as a single entity.

Company Tax Rate

The percentage of a company's taxable income that it must pay to the government as corporate income tax.

Rent Revenue

Income earned by a company from renting out properties or equipment to others.