When Pollution (A Negative Externality)is Created by Firms,which of the Following

question 40

Multiple Choice

When pollution (a negative externality) is created by firms,which of the following is NOT a valid way for the government to restore the social optimum?

• A) require firms to install pollution-abatement equipment
• B) require firms to change production techniques to reduce emissions
• C) levy a tax on the production of the good
• D) require firms to pay for the environmental damage they create
• E) offer a subsidy to firms to reduce their production costs

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Definitions:

Production Possibilities Curve

A graphical representation showing the maximum number of goods or services that can be produced with a fixed amount of resources.

Resources

Inputs or factors used in the production of goods and services, including labor, capital, land, and technology.

Efficiently

Performing or functioning in the best possible manner with the least waste of time and effort.

Production Possibilities Curve

A graphical representation showing the maximum quantity of goods and services that can be produced within a given set of resources and technology.