The government levying taxes on polluters or charging a surcharge for pesticide use are ?
Correct answer: B. internalization of negative spillover effects
- A. examples of Coase's theorem
- B. internalization of negative spillover effects
- C. marginal abatement cost
- D. examples of a free rider
Explanation
A tax or surcharge makes polluters bear part of the external cost they impose on society, bringing private costs closer to social costs. This is the internalization of a negative externality, not Coase's theorem or a free-rider problem.
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Government revenue and expenditure are analysed through taxation, public borrowing, budgets, subsidies, transfers and public debt. The topic explains how fiscal policy affects resource allocation, income distribution, economic stability and growth, while distinguishing direct from indirect taxes, progressive from regressive taxation, and public goods from goods supplied by private markets.
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