A Corrective Tax on Polluting Firms Equal to the External

question 9

Multiple Choice

A corrective tax on polluting firms equal to the external cost imposed on third parties will:

• A)eliminate pollution totally.
• B)increase the level of pollution.
• C)force polluters to internalize the external cost resulting from their actions.
• D)usually have no impact on pollution levels, but will generate tax revenue for the government.
• E)create the free-rider problem.

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Definitions:

Conforming Goods

Products that meet the specifications and quality standards as outlined in a contract agreement between a buyer and seller.

Destination

A place to which a person or thing is going or being sent.

Agreed-On Remedy

A pre-determined solution or compensation for breach of contract that parties consent to during the formation of a contract.

UCC

Refers to the Uniform Commercial Code, a comprehensive set of laws governing commercial transactions in the United States.