In How Economics Saved Christmas, economist Art Carden retold the Dr. Seuss story of the Grinch who hated Christmas and stole the decorations, food, and presents from neighboring Whoville. Complete this passage from Carden's poem:
He reached for his textbooks; he knew what to do
He'd fight them with ideas from A.C. Pigou
This idea has merit, he thought in the frost
A ____ that was equal to _____ cost

Question

Quizplus · Accepted Answer

The Grinch is considering implementing a tax that would be equal to the external cost. This aligns with the concept of negative externalities in economics, where an activity (in this case, the Grinch's theft of Christmas) imposes costs on others that are not reflected in the market price. By implementing a tax equal to the external cost, the Grinch would be correcting for this market failure and reducing the negative impact of his actions on the people of Whoville.

In How Economics Saved Christmas, Economist Art Carden Retold the Dr