The government can _______________ change an inefficient market outcome (in the case where there is a negative externality)into an efficient outcome by imposing a tax on the activity that generates the negative externality.

Question

Quizplus · Accepted Answer

Imposing a tax on the activity that generates a negative externality can potentially correct the market inefficiency by internalizing the external cost, but its effectiveness depends on various factors such as the size of the tax, the elasticity of demand, and the ability to accurately measure the externality.

The Government Can _______________ Change an Inefficient Market Outcome (In