Due to a firm generating external costs, the government decides to the firm. When this happens, the firm will produce units of output than before the tax was imposed in order to continue maximizing profits.

A) subsidize; fewer
B) subsidize; more
C) tax; fewer
D) tax; more

Question

Due to a firm generating external costs, the government decides to ________ the firm. When this happens, the firm will produce ________ units of output than before the tax was imposed in order to continue maximizing profits.

A) subsidize; fewer
B) subsidize; more
C) tax; fewer
D) tax; more

Kelly Scott · Accepted Answer

Final Answer : C, Explanation :  When a government taxes a firm that generates external costs, the firm faces higher production costs. To maximize profits under these new conditions, the firm will typically reduce its output, producing fewer units than before the tax was imposed. This adjustment is made to offset the increased costs associated with the tax.

Due to a firm generating external costs, the government decides to the firm. When this happens, the firm will produce units of output than before the tax was imposed in order to continue maximizing profits.

A) subsidize; fewer
B) subsidize; more
C) tax; fewer
D) tax; more

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Learning Objectives

Related questions

Due to a firm generating external costs, the government decides to ________ the firm. When this happens, the firm will produce ________ units of output than before the tax was imposed in order to continue maximizing profits.A) subsidize; fewerB) subsidize; moreC) tax; fewerD) tax; more

Definitions

Learning Objectives

Learning Objectives

Related questions

Due to a firm generating external costs, the government decides to the firm. When this happens, the firm will produce units of output than before the tax was imposed in order to continue maximizing profits.

A) subsidize; fewer
B) subsidize; more
C) tax; fewer
D) tax; more