All welfare programs are means-tested income transfers

Distinguish among public goods, private goods, common resources, and natural monopoly goods

What will be an ideal response?

Suppose the government imposes a per unit tax on an item whose production process creates a negative externality. Suppose the tax is exactly the value of the marginal externality cost. If the government now uses the tax revenue to clean up pollution from this process, the market will:

a. have internalized all costs and benefits. b. be inefficient. c. be destroyed. d. not have failed. e. be subject to obligatory controls.