In the Case of a Positive Externality,in Order to Achieve

question 10

Multiple Choice

In the case of a positive externality,in order to achieve efficiency the government must set the _________________ equal to the marginal ____________________.

• A) tax; external costs
• B) tax; external benefits
• C) subsidy; external costs
• D) subsidy; external benefits
• E) subsidy; private costs

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Definitions:

Retail Goods

Products that are sold to the end consumer for personal or household use.

Price Skimming

A pricing strategy where a firm charges the highest initial price that customers will pay and lowers it over time as demand at the higher price is satisfied.

Maximizing Profits

The process or strategy of adjusting the operations, pricing, and production of a business to generate the highest possible profit margins.

Development Costs

Costs incurred in the design and development phase of a project, often relating to the creation of new products or services.