If a Tin of Sardines Creates a Noxious Odor for Non-Sardine-Eaters

question 5

Multiple Choice

If a tin of sardines creates a noxious odor for non-sardine-eaters equivalent to $1 per tin, a $1 per tin tax on sardines would:

• A) create a deadweight loss, as all taxes do, and correct the odorous externality.
• B) decrease deadweight loss but fail to correct the odorous externality.
• C) create a deadweight loss and fail to correct the odorous externality.
• D) decrease deadweight loss by correcting the odorous externality.

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Definitions:

Usable Information

Data or facts that have been processed or organized in a way that they can be understood and utilized by the user, often to make decisions or solve problems.

Decision-Making Process

The cognitive process leading to the selection of a course of action among several alternative scenarios.

Black Box

A system or object which can be viewed in terms of its inputs and outputs without any knowledge of its internal workings.

Cognitive Dissonance

The conflict (i.e., remorse) that buyers feel after making a major purchase.