Figure 9.7
-Consider Figure 9.7, which depicts the supply and demand for coal. Assume coal production creates external costs. If PE and QE are the equilibrium price and quantity of coal without government regulation, a pollution tax on the production of coal would _______ the price of coal relative to PE and _______ the quantity of coal relative to QE.

Question

Quizplus · Accepted Answer

A pollution tax would internalize the external costs, increasing the price of coal and decreasing the quantity produced and consumed relative to the unregulated equilibrium.

Figure 9.7 -Consider Figure 9.7, Which Depicts the Supply and Demand for Demand