Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
market efficiency
B
positive externalities
C
negative externalities
D
tax evasion
Understanding the Answer
Let's break down why this is correct
Answer
Per-unit taxes are designed to address negative externalities, which occur when the production or consumption of a good causes harm to others who are not directly involved in the transaction. When producers don't consider these external costs, they tend to produce more than what is socially optimal, leading to overproduction and negative effects on society, like pollution. By imposing a tax for each unit produced, the government forces producers to factor in these external costs, aligning their private costs with the broader societal costs. For example, if a factory emits pollution while making goods, the tax on each product encourages the factory to reduce production, leading to less pollution and a healthier environment. This way, per-unit taxes help achieve a balance where production levels are more efficient for society as a whole.
Detailed Explanation
Negative externalities happen when a product's production harms others, like pollution. Other options are incorrect because Market efficiency means resources are used well; Positive externalities benefit others, like education.
Key Concepts
Per-unit taxes
Marginal social cost
Market efficiency
Topic
Understanding Per-Unit Taxes
Difficulty
easy level question
Cognitive Level
understand
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