Question

Government can raise economic efficiency through all of the following policies, except:_______.a) outlawing various forms of commercial deception. b) imposing pollution taxes on polluting firms. c) using tax money to subsidize goods with external benefits. d) fixing the prices of various resources and products.

Answer 1

Answer:

d) fixing the prices of various resources and products.

Explanation:

Commercial deception is false advertising. It is creating a false impression about a good or service. False advertising misleads consumers and reduces efficiency. Commercial deception is illegal in some countries.

Negative externality is when the costs of economic activities to third parties exceeds its benefits. Negative externality reduces efficiency. The government can discourage the production of goods and services that create negative externality by imposing taxes. Taxes increases the cost of production and discourages production of that good.

Positive externality is when the benefits of economic activities to third parties exceeds the cost. Goods that produce postive externality are usually underproduced. The government can encourage production of goods that produce postive externality by subsidizing to encourage production.

Government fixing prices can be called either price ceiling or price floor. Price ceiling or price floor can discourage production and consumption respectively.

I hope my answer helps you.