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:

Board of Governors

The leading body of a central bank or other regulatory institution, responsible for overseeing the management and operations.

Fed

Short for the Federal Reserve, which is the central banking system of the United States responsible for monetary policy.

District Banks

Components of the Federal Reserve System, each serving a specific geographic area in the United States, involved in banking regulation and policy implementation.

Federal Reserve System

The central banking system of the United States, regulating the national money supply and aiming to maintain economic stability.