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3 September, 21:39

Suppose a tax equal to the value of the marginal external cost at the optimal output is imposed on a pollution generating good. All of the following will result from the tax except

A) an increase in demand for the good.

B) an increase in the equilibrium market price.

C) a decrease in the equilibrium quantity produced and consumed

D) a decrease in market supply of the good.

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  1. 3 September, 22:01
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    C) a decrease in the equilibrium quantity produced and consumed

    Explanation:

    Marginal external cost is the change in the cost to parties other than the producer or buyer of a good or service due to the production of an extra unit of the good or service.
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