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A. increase and output will decrease<br />
B. increase and output will increase<br />
C. decrease and output will<br />
decrease<br />
D. decrease and output will increase<br />
Question 7 of 402.5/ 2.5 Points<br />
If a producer is imposing an external cost on society, the best response would be to<br />
__________ .<br />
A. lower the producer's taxes to offset<br />
pollution<br />
B. increase the production<br />
C. internalize the externality<br />
D. subsidize the producer<br />
Question 8 of 402.5/ 2.5 Points<br />
The biggest problem with using a tax as a way to solve an externality problem is that<br />
__________ .<br />
A. the tax sometimes increases the external cost<br />
B. damages must be estimated in financial terms to determine the correct level of the<br />
tax<br />
C. the firm will pass the entire tax onto the consumer<br />
D. the commerce clause forbids such taxes<br />
Question 9 of 402.5/ 2.5 Points
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