Suppose That Electricity Producers Create a Negative Externality Equal to $6

question 525

Multiple Choice

Suppose that electricity producers create a negative externality equal to $6 per unit. Further suppose that the government imposes a $8 per-unit tax on the producers. What is the relationship between the after-tax equilibrium quantity and the socially optimal quantity of electricity to be produced?

• A)They are equal.
• B)The after-tax equilibrium quantity is greater than the socially optimal quantity.
• C)The after-tax equilibrium quantity is less than the socially optimal quantity.
• D)There is not enough information to answer the question.

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Definitions:

Susceptible

The state of being likely to be influenced or harmed by a particular thing or condition.

Spatial Relationships

The position of objects or entities in relation to each other within a given space.

Australian Aboriginal

Indigenous people native to Australia, recognized for their rich culture, traditions, and history that predates European colonization.