To Move Closer to the Social Optimum When a Negative

question 12

Multiple Choice

To move closer to the social optimum when a negative externality exists, the cost to society of the externality should be:

• A)incorporated/added on to the price so that demand reflects the true social costs.
• B)calculated per unit and producers taxed accordingly with a goal of making the supply curve reflective of the marginal social cost of the externality.
• C)minimized by forcing producers of the externality to shut down when they produce a negative externality.
• D)minimized by subsidizing the producers of the externality.

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Definitions:

Normality

In statistics, a condition in which a distribution approximates the normal distribution, characterized by a bell-shaped curve.

Consistent

In statistics, a property of an estimator indicating that as the sample size increases, it converges in probability to the true parameter value.

T Distribution

A statistical distribution type that emerges when calculating the average of a population with a normal distribution, under conditions where there are few samples and the population's standard deviation is not known.

Degrees Of Freedom

The number of independent values within a calculation that can freely vary when estimating statistical parameters.