For which of the following goods would the imposition of a tax most likely improve the efficiency of the market outcome?
A) the production of a good with external benefits
B) the production of a rival good with no external costs
C) the production of a good with external costs
D) the production of a public good

Question

Quizplus · Accepted Answer

The production of a good with external costs leads to market failure because the producers do not consider the full social cost of production. By imposing a tax, the price increases and producers must internalize the external cost, resulting in a more efficient market outcome.

For Which of the Following Goods Would the Imposition of a Tax