Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
A speed limit reducing the number of traffic accidents
B
A sales tax increasing the price of goods sold
C
A fine for littering discouraging pollution
D
A subsidy increasing the availability of public transport
Understanding the Answer
Let's break down why this is correct
Answer
Per-unit taxes on production can be compared to a scenario where a factory has to pay a fee for each item it produces. Imagine a bakery that must pay a dollar for each loaf of bread it bakes. This fee increases the cost of making bread, so the bakery might raise its prices to cover the tax. Similarly, a per-unit tax on production means that for every item made, the producer pays a set amount, which can lead to higher prices for consumers. Therefore, we can say that if A is the bakery and B is the price of bread, then C would be a factory and the price of its product.
Detailed Explanation
A fine for littering makes people think twice before polluting. Other options are incorrect because A speed limit is about safety, not about changing production; A sales tax raises prices for buyers, but it doesn't change how much is made.
Key Concepts
Per-unit taxes and their impact on marginal costs
Negative externalities and social costs
Market efficiency
Topic
Understanding Per-Unit Taxes
Difficulty
hard level question
Cognitive Level
understand
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