Refer to the Figure Below

question 105

Multiple Choice

Refer to the figure below. If negotiation is impractical, the socially optimal level of production can be achieved by:

• A)banning production of paper.
• B)compensating those injured by the externality.
• C)imposing a tax on paper equal to the external cost.
• D)subsidizing paper by the amount of the external benefit.

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Definitions:

Creative

Having the ability or power to create, characterized by originality of thought or inventiveness.

Psychosexual Development

A theory introduced by Sigmund Freud that describes how personality develops during childhood through a series of stages centered on erogenous zones.

Fixation

In psychoanalytic theory, leaving a disproportionate share of one’s libido behind at an earlier stage of development.

Libido

A term in psychoanalytic theory for the energy of the sexual drive as a component of the life instinct.