Which of the following statements is false?
A)A subsidy can be used to internalize a negative externality; a tax can be used to internalize a positive externality.
B)Ronald Coase stressed the reciprocal nature of externalities.
C)One way to deal with negative externalities is for government to apply regulations directly to the activity that generates the externalities.
D)Simply because taxes and subsidies are sometimes used to adjust for negative and positive externalities, respectively, it does not necessarily follow that the socially optimal level of output will be reached.

Question

Quizplus · Accepted Answer

A subsidy is typically used to encourage activities that have positive externalities, not to internalize negative externalities. Conversely, a tax is used to discourage activities that have negative externalities, not to internalize positive externalities.

Which of the Following Statements Is False