If the Production of a Good Generates External Benefits, the Government

question 19

Multiple Choice

If the production of a good generates external benefits, the government could increase efficiency by

• A) taxing the production of the good to reduce the amount produced.
• B) subsidizing production of the good to increase the amount produced.
• C) regulating production of the good to reduce the amount produced.
• D) requiring all producers of the product to be licensed to produce the product.

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Definitions:

Interest Annually

The payment received or paid out for the use of money on a yearly basis.

Principal Due

The amount of the original loan or bond issue that is still owed, excluding interest payments.

Discount Rate

The interest rate used to discount future cash flows to their present value, important in the evaluation of investment opportunities.

Monthly Payments

Regular payments made over a period of time, often associated with loans or leases.