A Tax Equal to the External Cost on Firms That

Multiple Choice

A tax equal to the external cost on firms that emit pollutants would:

A) ​provide firms with the incentive to increase the level of activity creating the pollution.
B) ​provide firms with the incentive to decrease the level of activity creating the pollution.
C) ​provide firms with little incentive to search for less environmentally damaging production methods.
D) ​not reduce pollution levels at all.