If a polluting producer is forced to pay a pollution charge, what is the effect on the supply and/or demand curves for the product?
A) The firm's supply curve shifts rightward.
B) The firm's demand curve shifts leftward.
C) The firm's supply curve shifts leftward.
D) The quantity supplied along the firm's supply curve increases.
E) BOTH the supply curve and the demand curve shift leftward.

Question

Quizplus · Accepted Answer

The pollution charge increases the cost of production for the polluting producer, causing the supply curve to shift leftward. It does not directly affect the demand curve, so it does not shift leftward. Therefore, the best choice is C.

If a Polluting Producer Is Forced to Pay a Pollution