If a tax is placed on perfectly competitive firms that impose external costs on society, the firm's marginal cost curve will shift ________ and the industry supply curve will shift to the ________.
A) down; left
B) down; right
C) up; right
D) up; left

Question

Quizplus · Accepted Answer

When a tax is placed on firms that impose external costs, it effectively increases their cost of production. This causes the firm's marginal cost curve to shift up, reflecting higher costs at each level of output. Consequently, the industry supply curve shifts to the left, indicating a decrease in the total quantity supplied at each price level, as it becomes more costly for firms to produce.

If a Tax Is Placed on Perfectly Competitive Firms That