Correcting a market with an externality through taxation creates ___________ total surplus compared to correcting it through a quota.
A) more
B) less
C) the same
D) Any of these statements could be true depending on whether the tax is imposed on the buyer or seller.

Question

Quizplus · Accepted Answer

Correcting a market with an externality through taxation creates more total surplus compared to correcting it through a quota. This is because a tax creates a revenue stream for the government while a quota doesn't generate any revenue. Additionally, a tax allows for more flexibility in terms of adjusting the rate to achieve optimal outcomes.

Correcting a Market with an Externality Through Taxation Creates ___________