If the Production of a Particular Good Involves Significant External

question 162

Multiple Choice

If the production of a particular good involves significant external costs, to force the externality to be internalized the government might:

• A)​impose a tax on production of the good in order to increase production.
• B)​impose a tax on production of the good in order to decrease production.
• C)​offer a subsidy for production of the good in order to increase production.
• D)​offer a subsidy for production of the good in order to decrease production.

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Definitions:

Financial Leverage

Financial leverage refers to the use of borrowed money (debt) to finance the acquisition of assets, with the expectation that the income or capital gain from the assets will exceed the cost of borrowing.