Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
Imposing a tax on a factory that emits pollution, aiming to reflect the social cost of production.
B
Providing subsidies to consumers for purchasing electric vehicles, encouraging cleaner technology.
C
Allowing companies to self-regulate their emissions without any government oversight.
D
Reducing tariffs on imported goods to promote competition in the market.
Understanding the Answer
Let's break down why this is correct
Answer
A negative externality occurs when a person's actions cause harm to others, but the person does not bear the full cost of that harm. For example, imagine a factory that produces pollution as it makes its products. The factory benefits from selling its goods and making a profit, but the nearby residents suffer from the air pollution, which can lead to health issues. In this case, the government can step in by imposing regulations or taxes on the factory to reduce pollution. This way, the factory must consider the health costs to the community, helping to correct the market inefficiency by aligning the factory's costs with the social costs of its pollution.
Detailed Explanation
When a factory pollutes, it harms people and the environment. Other options are incorrect because Offering money to buy electric cars sounds good, but it doesn't fix pollution from factories; Letting companies control their own pollution can lead to more harm.
Key Concepts
Government intervention
Market inefficiency
Externalities
Topic
Government and Market Efficiency
Difficulty
easy level question
Cognitive Level
understand
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