Correcting a market with an externality through taxation creates _______ total surplus compared to correcting the market through the use of a quota.
A)more
B)less
C)the same amount of
D)All of these could be true dependent on whether the tax is imposed on the buyer or seller.

Question

Quizplus · Accepted Answer

Taxation can lead to a more efficient allocation of resources by internalizing the externality, potentially increasing total surplus compared to a quota, which may not be as flexible or efficient in addressing the externality.

Correcting a Market with an Externality Through Taxation Creates _______