A local cafe that allowed patrons to smoke was forced to stop serving customers because it did not comply with local clean air standards.This decision provides an example of
A)a direct regulation of an externality.
B)corrective taxes.
C)a Coase theorem solution to an externality.
D)the misuse of a subsidy.

Question

Quizplus · Accepted Answer

This is an example of direct regulation of an externality because the cafe's smoking policy was affecting the air quality in the local area, and the local government intervened to enforce clean air standards.

A Local Cafe That Allowed Patrons to Smoke Was Forced