Figure 9.8
-Figure 9.8 depicts a market for electricity. Assume electricity production incurs external costs. If the government imposes the pollution tax in the amount illustrated, the amount of the pollution tax shifted forward on to consumers is:

Question

Quizplus · Accepted Answer

The pollution tax is shifted forward onto consumers by the amount PA - PB. This is because the tax increases the cost of production for electricity producers, who then pass on some of the cost to consumers in the form of higher prices.

Figure 9.8 -Figure 9.8 Depicts a Market for Electricity. Assume Electricity Production