Suppose a Tax Equal to the Value of the Marginal

question 29

Multiple Choice

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 the equilibrium market price.
• B)a decrease in the equilibrium quantity produced and consumed.
• C)a decrease in market supply of the good.
• D)an increase in demand for the good.

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