Author Question: Which of the following are true? a. Negative externalities are real costs, but, unlike the other ... (Read 63 times)

mcmcdaniel · **on:** Jun 30, 2018

Which of the following are true?
a. Negative externalities are real costs, but, unlike the other resources a firm uses in production, no one owns the air, so a firm does not have to pay for its use.
b. In the case of external costs, firms tend to produce too much from society's standpoint, causing an efficiency loss due to an overallocation of scarce resources to the production of the good.
c. If government could impose a pollution tax equal to the exact size of the external costs imposed by a firm, then the firm would produce at the socially desired level of output.
d. All of the above are true.

Question 2

When a country allows trade and becomes an exporter of goods both domestic consumers and domestic producers benefit.
a. True
b. False
Indicate whether the statement is true or false