When economists propose taxes as a way to balance out the presence of externalities,they try to propose taxes:
A)based on the externality itself,rather than the action that creates it.
B)on the action that creates the externality,rather than the externality itself.
C)on what is simplest to implement.
D)on what will likely generate the most revenue.

Question

Quizplus · Accepted Answer

Economists propose taxes based on the externality itself, rather than the action that creates it, to ensure that the tax directly addresses the negative or positive impact of the externality on society.

When Economists Propose Taxes as a Way to Balance Out