Multiple Choice
Which of the following is false?
A) Negative externalities are real costs, but, unlike the other resources a firm uses in production, no one owns the air, so a firm does not have to pay for its use.
B) In the case of external costs, firms tend to produce too much from society's standpoint, causing an efficiency loss due to an overallocation of scarce resources to the production of the good.
C) If government could impose a pollution tax equal to the exact size of the external costs imposed by a firm, then the firm would produce at the socially desired level of output.
D) Alternatives to pollution taxes include the government prohibiting certain types of activities causing pollution or forcing firms to clean up their emissions.
E) None of the above are false; all are true.
Correct Answer:
Verified
Correct Answer:
Verified
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