When Producers Operate in a Market Characterized by Negative Externalities

question 307

Multiple Choice

When producers operate in a market characterized by negative externalities, a tax that forces them to internalize the externality will

• A)give sellers the incentive to account for the external effects of their actions.
• B)increase demand.
• C)increase the amount of the commodity exchanged in market equilibrium.
• D)restrict the producers' ability to take the costs of the externality into account when deciding how much to supply.

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Definitions:

Superego

A component of Freud's psychoanalytic theory representing the ethical and moral dimensions of personality, internalizing societal standards of right and wrong.

Social-Cognitive Perspective

A psychological approach that emphasizes the role of cognitive processes in understanding social behavior.

Inner Traits

Characteristic qualities or attributes that make up an individual’s personality, often considered to be internal and stable.

Situational Influences

External factors in the environment that affect individual behavior, decision-making, and attitudes in specific contexts.