Which of the following will eliminate the inefficiency problems associated with negative externalities?

Question

Quizplus · Accepted Answer

To deal with negative externalities, the goal is to internalize the marginal cost of the externality. One way to achieve this is through a tax on producers that reflects the marginal cost of the negative externality. This tax would increase the cost of producing goods that generate negative externalities, which would lead to a decrease in output and consumption. By making producers bear the cost of the externality, they will have an incentive to reduce the level of pollution or other negative externality associated with their production. Therefore, option C is the best choice.

Which of the Following Will Eliminate the Inefficiency Problems Associated