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:

External Iliac Vein

A large vein in the pelvic region that carries deoxygenated blood from the lower limbs back to the heart.

Cephalic Vein

A large vein on the outermost side of the upper arm, commonly used for intravenous injections or blood draw.

Hepatic Vein

A vein that drains blood from the liver into the inferior vena cava, helping in the regulation of blood pressure in the liver.

Radial Vein

The radial vein is a blood vessel in the forearm that drains blood from the lateral aspects of the hand and arm, ultimately returning it to the heart.