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If a Unit Tax Is Used to Internalize the Consumption

question 4

True/False

If a unit tax is used to internalize the consumption externality of chemical use, it achieves efficiency if it is set equal to the MSB at the efficient output level.


Definitions:

Present Value

The present value of a future amount of money or series of cash flows using a predetermined rate of return.

Perpetuity

A financial term for a stream of cash payments that continue indefinitely.

Semi-Annually

A term indicating something occurs twice a year.

Endowment Fund

A financial asset, often in the form of a donation to institutions, where the principal remains intact and only the investment income is used.

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