-Refer to the above graph to answer this question.If this product were taxed by an amount equal to the external costs,what would be the equilibrium values of price and quantity?
A)$80 and 40.
B)$100 and 30.
C)$100 and 80.
D)$120 and 70.
E)$120 and 80.

Question

-Refer to the above graph to answer this question.If this product were taxed by an amount equal to the external costs,what would be the equilibrium values of price and quantity?
A)$80 and 40. 
B)$100 and 30. 
C)$100 and 80. 
D)$120 and 70. 
E)$120 and 80.

Quizplus · Accepted Answer

Taxing the product by an amount equal to the external costs would internalize the externality, shifting the supply curve to the left. This would increase the price and decrease the quantity to the new equilibrium where the social cost is accounted for, which is represented by option B, $100 and 30.

-Refer to the Above Graph to Answer This Question