Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
B → D → C → A
B
B → C → A → D
C
D → A → B → C
D
A → B → C → D
Understanding the Answer
Let's break down why this is correct
Answer
To address negative externalities in consumption, we begin by recognizing that consumption can impose costs on people who are not directly involved in the transaction, which is step B. Next, we identify the deadweight loss caused by this externality in step C, as it shows the inefficiency in the market where resources are not allocated optimally. After understanding the loss, we assess the difference between the marginal social benefit and marginal private benefit in step D, which helps us see how much the externality affects society overall. Finally, we implement taxes in step A to correct this market inefficiency, encouraging consumers to take into account the full costs of their consumption. For example, if a factory pollutes the air while producing goods, the government can impose a tax on the factory to reduce its pollution and make it pay for the harm it causes to others.
Detailed Explanation
First, we need to recognize that consumption can hurt others. Other options are incorrect because This option suggests we identify the loss before understanding the costs to others; This option starts with taxes before understanding the benefits and costs.
Key Concepts
Negative externalities in consumption
Marginal social benefit vs. marginal private benefit
Government intervention
Topic
Negative Externalities in Consumption
Difficulty
easy level question
Cognitive Level
understand
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