Which of the following statements is false?
A. In the case of a negative externality, the market equilibrium is inefficient.
B. In the case of a negative externality, when a tax is set equal to the marginal external costs (MEC) efficiency can be achieved.
C. In the case of a negative externality, when a tax is set that is greater than the marginal external costs (MEC) inefficiency will result.
D. In the case of a positive externality, when a tax is set equal to the marginal external benefits (MEB) efficiency can be achieved.
Answer: D
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A) upward; increases B) upward; decreases C) downward; increases D) downward; decreases
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