Suppose a Per-Unit Tax Is Imposed on a Firm's Output

question 81

Multiple Choice

Suppose a per-unit tax is imposed on a firm's output which makes the marginal private cost of production equal to the marginal social cost.In this case,we can then say that

• A)the externality has been fully internalized for that firm.
• B)the firm will make losses as its costs have increased.
• C)the internality has been externalized for that firm.
• D)the firm will be forced by the extra cost burden to leave the industry.
• E)the firm will not make any changes to its output decision.

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