Government Can Correct for Negative Externalities by

question 262

Multiple Choice

Government can correct for negative externalities by

• A) decreasing taxes.
• B) increasing taxes or regulation.
• C) allowing the market system to correct the problem.
• D) decreasing the costs to those responsible for the externality.

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Definitions:

Loan

A sum of money that is borrowed and expected to be paid back with interest.

Economies of Scale

Refers to the cost advantage that arises with increased output of a product, leading to a reduction in the per-unit cost.

Marginal Cost

An alternative phrasing expressing the additional cost incurred from the production of the next unit of output.

Average Total Cost

The cost per unit is calculated by dividing the overall production cost by the quantity of units produced.