Taxes Imposed on Polluting Firms,for Internalizing the Externalities Created by Them,may

Multiple Choice

Taxes imposed on polluting firms,for internalizing the externalities created by them,may not always lead to an efficient solution because:

A) the taxes lowers the firms' incentives to reduce pollution
B) it is difficult to determine the appropriate level of the tax that will result in an efficient output.
C) firms that cannot earn positive economic profits after the tax is imposed will go out of business.
D) the tax imposed by the government results in an increase in the average price level.