If the Government Forced External Cost Internalization with a Tax

question 71

Multiple Choice

If the government forced external cost internalization with a tax on all firms that emit pollution, then:

• A) the market would be socially inefficient because taxes create deadweight losses.
• B) the market price of these goods would fall.
• C) production would actually increase.
• D) deadweight loss to society would decrease.

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Definitions:

Attrition

The process of reducing something's strength or effectiveness through sustained attack or pressure.

Experimental Design

A methodology for conducting research that involves planning, conducting, and evaluating experiments to test hypotheses.

Correlations

Statistical measures that describe the extent to which two or more variables move together, without necessarily implying causation.

Internal Validity

The degree to which an experimental design is capable of eliminating confounding variables, ensuring that the results can be confidently attributed to the cause-and-effect relationship being tested.