{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

Chap10 - Chapter10 Externalities 10 a EXTERNALITIES 2...

Info icon This preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
Problems and Applications 2. a. The statement, "The benefits of corrective taxes as a way to reduce pollution have to be  weighed against the deadweight losses that these taxes cause," is false. In fact,  corrective taxes reduce the inefficiency of pollution by reducing the quantity of the good  being produced that has pollution as a by-product. So, corrective taxes reduce  deadweight loss; they do not increase it. b. The statement, "When deciding whether to levy a corrective tax on consumers or  producers, the government should be careful to levy the tax on the side of the market  generating the externality," is inaccurate. It does not matter on whom the tax is  imposed the incidence of the tax will be identical. So whether the externality is caused  by the seller or the buyer of a good, a tax on either producers or consumers will lead to  the same reduction of quantity and change in the prices producers receive or consumers  pay.
Image of page 1

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern