Which of the Following Statements Is TRUE

question 1

Multiple Choice

Which of the following statements is TRUE?
I. A Pigouvian subsidy reduces the market price to encourage consumption and correct for the underproduction of a good.
II. A Pigouvian tax increases the market price to discourage consumption and correct for the overproduction of a good.
III. Negative externalities create deadweight losses, but positive externalities do not.

• A) III only
• B) I, II, and III
• C) I and II only
• D) I only

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Definitions:

Quantity of Sales

The total number of units sold of a particular product or service within a specific timeframe.

First Year

The initial year of a particular time frame or activity, often used to set a baseline for comparison.

Profit Generated

The amount of money that remains from revenues after all the firm's expenses are subtracted.

Second Year

The period or stage that follows the first year in a multi-year sequence, such as in education or a job.