-If a Pollution Tax in a Market with an External

question 86

Multiple Choice

-If a pollution tax in a market with an external cost changes the market so that it produces the efficient level of output, which of the following occurs? i. The supply curve shifts leftward.
Ii) The price increases.
Iii) The quantity produced decreases.

• A) i only
• B) ii only
• C) iii only
• D) i and ii
• E) i, ii and iii

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Definitions:

Fixed Cost

A cost that does not change with an increase or decrease in the amount of goods or services produced or sold.

Manufacturing Overhead

All factory-related costs that are incurred during the manufacturing process, excluding direct materials and direct labor.