Oscar owns a meat processing plant whose unpleasant odors waft across the city.Because the production of processed meat provides a negative externality to the community, the government should:
A)impose a tax on Oscar's production of processed meat, since the market quantity is less than the socially optimal quantity.
B)subsidize Oscar's production of processed meat, since the market quantity is greater than the socially optimal quantity.
C)subsidize Oscar's production of processed meat, since the market quantity is less than the socially optimal quantity.
D)impose a tax on Oscar's production of processed meat, since the market quantity is greater than the socially optimal quantity.

Question

Quizplus · Accepted Answer

A tax should be imposed to correct the negative externality, as the market quantity is greater than the socially optimal quantity.

Oscar Owns a Meat Processing Plant Whose Unpleasant Odors Waft