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

Question

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When the per-unit tax is imposed and the marginal private cost of production becomes equal to the marginal social cost, it implies that the external cost or negative externality associated with the firm's production has been fully internalized. This means that the firm is now bearing the full cost of production, including the social or external cost, and is producing the optimal level of output that takes into account both private and social costs. Therefore, the answer is A, and the other options are incorrect.

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