Taxes Imposed on Polluting Firms,for Internalizing the Externalities Created by Them,may

question 41

Multiple Choice

Taxes imposed on polluting firms,for internalizing the externalities created by them,may not always lead to an efficient solution because:

• A)the taxes lowers the firms' incentives to reduce pollution
• B)it is difficult to determine the appropriate level of the tax that will result in an efficient output.
• C)firms that cannot earn positive economic profits after the tax is imposed will go out of business.
• D)the tax imposed by the government results in an increase in the average price level.

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Definitions:

Heterogeneous Mixture

A combination of substances that are not uniformly distributed and in which the individual components can be distinguished physically.

Nitrogen

A colorless, odorless gas that is the most abundant element in the Earth's atmosphere, essential for plant and animal life.

Argon

A noble gas element with atomic number 18, colorless and odorless, used in lighting and welding due to its inertness.

Baking Soda

A common name for sodium bicarbonate, a chemical compound used in baking as a leavening agent.