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Unformatted text preview: 16. The case for government intervention in response to externalities is based on an
A. policy-based intervention sometimes has lower transaction costs than private
B. government sometimes has an institutional advantage over private contracts.
C. government has better information amount costs and benefits than private individuals.
D. Both A and B.
17. The Pigouvian solution to a negative externality is
A. to provide a subsidy to the external agents to compensate for the cost imposed upon
B. to impose a tax on the source activity reflective of the magnitude of the external cost.
C. to subsidize private contracts so as to reduce transaction costs.
D. to define and enforce property rights.
18. “The primary purpose of a Pigouvian tax is to raise the revenue needed to compensate
external agents for the cost imposed upon them by the source activity”. True or false?
B. False. 43 19. “Pigouvian taxes and subsidies work best when there do not exist even...
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- Spring '14