The Strongest Case for Government with Respect to a Negative

question 4

Multiple Choice

The strongest case for government with respect to a negative externality is that government needs to set the

• A) subsidy equal to the marginal private benefits.
• B) tax equal to the marginal external costs plus $1.
• C) tax slightly below the marginal external costs.
• D) tax equal to the marginal external costs.
• E) subsidy equal to the marginal social benefits.

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Definitions:

Fly

An insect of the order Diptera, known for its ability to fly and its role in various ecological processes such as pollination and decomposing organic matter.

Atmosphere

The layer of gases surrounding Earth, protecting it from extreme temperatures and harmful space energies.

Gaseous Layer

A stratum of the atmosphere composed of gases, such as the ozone layer, which provides protection from the sun's harmful ultraviolet radiation.

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A celestial body orbiting a star or stellar remnant, with sufficient mass for self-gravity and a clear path in its orbit.