When Pollution (A Negative Externality) Is Created by Firms, Which

question 113

Multiple Choice

When pollution (a negative externality) is created by firms, which of the following is NOT a valid way for the government to restore the social optimum?

• A) require firms to install pollution-abatement equipment
• B) require firms to change production techniques to reduce emissions
• C) levy a tax on the production of the good
• D) require firms to pay for the environmental damage they create
• E) offer a subsidy to firms to reduce their production cost

---

Definitions:

Allowance for Doubtful Accounts

This is an estimation of the amount of receivables that a company does not expect to actually collect, reflecting potential losses due to customers' inability to pay.

Uncollectible

Uncollectible refers to debts or receivables that are deemed to be impossible to collect, often resulting in a write-off by the business.

Maturity Value

The amount that will be received at the end of a bond or other debt instrument's term.

Face Value

The nominal or dollar value printed on a security or currency, representing its legal value.