Economists tend to see taxing an action that produces a negative externality as:
A) the best solution possible, but often unattainable.
B) the second best solution possible but one that is attainable.
C) the best solution possible and often the most attainable.
D) the second best solution possible, but often unattainable.

Question

Quizplus · Accepted Answer

Taxing an action that produces a negative externality, such as pollution, is a second best solution because it does not eliminate the negative externality completely but rather internalizes the cost for those who create it. However, it is often the most attainable solution as it can be implemented through government policies and regulations. The best solution would be to directly reduce or eliminate the negative externality itself, but this is often difficult or impossible to achieve in practice.

Economists Tend to See Taxing an Action That Produces a Negative