One method of correcting for ____ externalities is to create a ...

[moongchi]

One method of correcting for ____ externalities is to create a ____ to make sure the market accounts for all costs and benefits.
 a. market failure; tax
  b. negative; tax
  c. positive; mechanism
  d. positive; tax
  e. negative; free market

Question 2

Sometimes the government deals with externalities by creating laws to regulate behavior instead of using taxes to correct the market failure. So, requiring auto manufacturers to install a device called a catalytic converter which removes some toxins from exhaust may be preferable to a gas tax that reduces driving levels. This route is often preferred because:
 a. c and e.
  b. it requires less technological development.
  c. it doesn't penalize drivers of clean cars.
  d. only car drivers pay for the externality.
  e. the cost of the externality is unknown.

[gstein359]

Answer to Question 1

b

Answer to Question 2

a

[moongchi]

Excellent

[ebonylittles]

Gracias!