The good creates a negative externality to producers. The government taxes producers exactly at the size of the external harm created by the externality. Which of the following is true: The tax will result in under provision of the good compared to the optimum The tax will result in over provision of the good compared to the optimum The tax will result in an optimal production of the good
The good creates a negative externality to producers. The government taxes producers exactly at the size of the external harm created by the externality. Which of the following is true: The tax will result in under provision of the good compared to the optimum The tax will result in over provision of the good compared to the optimum The tax will result in an optimal production of the good
Chapter1: Federal Income Taxation—an Overview
Section: Chapter Questions
Problem 76DC
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The good creates a negative externality to producers. The government taxes producers exactly at the size of the external harm created by the externality. Which of the following is true:
- The tax will result in under provision of the good compared to the optimum
- The tax will result in over provision of the good compared to the optimum
- The tax will result in an optimal production of the good
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