Multiple Choice
Suppose that electricity producers create a negative externality equal to $5 per unit.Further suppose that the government impose a $5 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.
Correct Answer:
Verified
Correct Answer:
Verified
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