Figure 9.9 shows the demand and supply of a product in a competitive market.

-Refer to Figure 9.9 to answer the question.Suppose this graph represents a polluting industry and that the government wishes to decrease its output by 10 units.Which of the following will produce this result?
A)Imposing an excise tax of $2.
B)Imposing an excise tax of $1.
C)Granting a subsidy of $2 to producers.
D)Granting a subsidy of $1 to producers.
E)Granting a subsidy of $2 to consumers.

Question

Figure 9.9 shows the demand and supply of a product in a competitive market.
 
-Refer to Figure 9.9 to answer the question.Suppose this graph represents a polluting industry and that the government wishes to decrease its output by 10 units.Which of the following will produce this result?
A)Imposing an excise tax of $2. 
B)Imposing an excise tax of $1. 
C)Granting a subsidy of $2 to producers. 
D)Granting a subsidy of $1 to producers. 
E)Granting a subsidy of $2 to consumers.

Quizplus · Accepted Answer

Imposing an excise tax increases the cost of production, which in turn reduces the quantity supplied. A tax of $2 is more likely to decrease output by the desired 10 units compared to the other options, as it directly affects the producer's cost.

Figure 99 Shows the Demand and Supply of a Product in in a Competitive