When a Clarke tax is used to finance a public good, each person's tax equals
a. the amount that he is willing to pay for the good.
b. the difference between the value he places on the public good and its cost.
c. the cost of the public good minus the value that other people claim to receive from it.
d. everyone else's tax, with the sum equaling the cost of producing the public good.
c. the cost of the public good minus the value that other people claim to receive from it.
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If the supply of a factor is perfectly inelastic, then
A) no more than the existing quantity can be supplied. B) the supply curve is horizontal. C) sellers will provide whatever quantity is demanded at the going price. D) a fall in price results in no quantity being supplied.
Explain the argument for why taxing externalities is an economically legitimate distortion
What will be an ideal response?