When a Producer Operates in a Market Characterised by Negative

Multiple Choice

When a producer operates in a market characterised by negative production externalities, a tax that forces them to internalise the externality will:

A) give sellers the incentive to take account of the external effects of their actions
B) have an offsetting effect that reduces the producer's private production costs
C) increase the amount of the commodity exchanged in market equilibrium
D) restrict the producer's ability to take the costs of the externality into account when deciding how much to supply