Assume That Production from an Electric Utility Caused Acid Rain

question 10

Multiple Choice

Assume that production from an electric utility caused acid rain.If the government imposed a tax on the utility equal to the cost of the acid rain, the government's action would

• A)externalise the externality.
• B)result in a marginal social benefit greater than the marginal cost of the electricity.
• C)be an example of supply side economic policy.
• D)internalise the externality.

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Definitions:

Interest Rates

The proportion of a loan charged as interest to the borrower, typically expressed as an annual percentage of the loan outstanding.

Probability

A measure quantifying the likelihood of certain events to occur within a given set.

Prior Probabilities

Probabilities that are assigned to events before any empirical data is taken into account, often based on theoretical considerations or past experience.

Multiplication Rule

A principle in probability theory used to find the probability of two independent events occurring simultaneously.