Which of the Following Statements Is Correct

question 411

Multiple Choice

Which of the following statements is correct?

• A)Corrective taxes are often preferred over direct regulation because they typically reduce externalities at a lower cost.
• B)Corrective taxes distort economic incentives.
• C)Corrective taxes are often preferred over direct regulation because they typically reduce externalities at a faster rate.
• D)Both a and b are correct.

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Definitions:

European Option

A type of financial derivative that gives an investor the right, but not the obligation, to buy or sell an asset at a specified price on the option's expiration date.

Warrant

A financial instrument that gives the holder the right, but not the obligation, to buy a company's stock at a specific price before a certain date.

Convertible Bond

A financial instrument that can be transformed into a certain number of the issuer's shares at various points in its existence, most often per the discretion of the individual possessing the bond.

Putable Bond

A type of bond that gives the holder the option to require the issuer to repurchase the security before its maturity date at a predetermined price.