In an Unregulated Market with an External Benefit,the

question 41

Multiple Choice

In an unregulated market with an external benefit,the

• A) quantity produced is greater than the efficient quantity.
• B) price charged is too high for efficiency.
• C) quantity produced is less than the efficient quantity.
• D) producer is causing pollution but not paying for it.
• E) government might impose a tax to help move the market toward the efficient amount of production.

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Definitions:

Pollution Permits

Marketable permits allowing holders to emit a certain amount of pollution, used as a regulatory tool to control environmental impacts.

Corrective Tax

A tax designed to induce private decision-makers to take account of the social costs that arise from a negative externality.

Government

The system or group of people governing an organized community, often a state, with the authority to make and enforce laws, policies, and decisions.

Tradable Pollution Permits

A regulatory system that allows companies to buy or sell allowances for a specific amount of pollution, encouraging reduction in overall emissions.