Governments Can Try and Correct the Problem of Negative Externalities

question 39

Multiple Choice

Governments can try and correct the problem of negative externalities from smoking by

• A) providing free medical care for smokers.
• B) investing in tobacco companies.
• C) using taxes and fines to reward smoking.
• D) using taxes and fines to penalize smokers.
• E) using subsidies to lower the cost of buying cigarettes.

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Definitions:

Compounded Monthly

Interest calculated on an investment or loan each month based on both the initial principal and the accumulated interest from previous months.

EAR

Effective Annual Rate, a measure of interest that takes into account the effect of compounding over a year.

Compounded Quarterly

The process whereby the interest earned on an investment is calculated and added to the principal sum every three months, then the new total is used for the next compounding period.

Compounded Annually

The process where the interest earned in one period is added to the principal, and then interest in the next period is calculated on the new total.