If a Tax Is Imposed on Externality-Producing Activities by Perfectly

question 18

Multiple Choice

If a tax is imposed on externality-producing activities by perfectly competitive firms so that the market is producing the efficient level of output, then

• A) P = MSC and MDC = 0.
• B) P = MSC and MDC > 0.
• C) P = MC and MDC = 0.
• D) P = MC and MDC > 0.

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