Suppose the Production of a Good Involves Significant External Benefits

question 7

Multiple Choice

Suppose the production of a good involves significant external benefits. To force the externality to be internalized, the government can:

• A)impose a tax on the production of the good in order to increase its production.
• B)impose a tax on the production of the good in order to decrease its production.
• C)offer a subsidy on the production of the good in order to increase its production.
• D)offer a subsidy on the production of the good in order to decrease its production.
• E)regulate the supply of the good by preventing the producers from producing too much of the good.

---

Definitions:

Muscle

A tissue in animal bodies composed of fibers capable of contracting to effect bodily movement.

Glossopharyngeal

Relating to the ninth cranial nerve, important for swallowing, saliva production, and the sensation of taste and touch from the posterior part of the tongue.

Hypoglossal

Relating to the hypoglossal nerve, which is the twelfth cranial nerve responsible for motor function of most of the tongue muscles.

Abducens

Relating to the abducens nerve, which is the sixth cranial nerve responsible for controlling the movement of a muscle that abducts the eyeball (lateral rectus muscle).