If the production of a product results in significant external costs, an appropriate government policy might be to
A) subsidize the production of the good.
B) tax producers and thus shift the supply curve to the left.
C) tax consumers' incomes and thus shift the demand curve to the left.
D) subsidize consumers since the good is being under-consumed.
B
You might also like to view...
What should affect the fundamental value of a stock according to the efficient markets hypothesis?
What will be an ideal response?
Scherer (1970) provides which of the following argument(s) to explain the appearance of antitrust laws?
(a) Many farmers believed that the growth of big business came at the expense of growth in agriculture. (b) Many ordinary individuals with moderate or low incomes were envious of the fame and wealth accumulated by the relatively few industrial entrepreneurs. (c) Falling costs in transportation resulted in growth of the optimal size of the firm. (d) All of the above.