Figure 10-14 -Refer to Figure 10-14. Which of the Following Statements Is

Multiple Choice

Figure 10-14
-Refer to Figure 10-14. Which of the following statements is correct?

A) To induce firms to internalize the externality in this market, the government should impose a tax measured by P₂ - P₀.
B) To induce firms to internalize the externality in this market, the government should offer a subsidy measured by P₂ - P₀.
C) To induce firms to internalize the externality in this market, the government should impose a tax measured by P₂ - P₁.
D) There is no externality in this market.