When a tax is imposed on a market with a negative externality, the market is:
A)inefficient, because the net benefit of buying another unit is zero for all market participants.
B)efficient, because the net benefit of buying another unit is zero for all market participants.
C)efficient, because the government mandates the efficient quantity without regard for net benefits.
D)inefficient, because the government mandates the tax without regard for net benefits.

Question

Quizplus · Accepted Answer

Imposing a tax on a market with a negative externality can correct the market failure by internalizing the external costs, leading to a situation where the net benefit of buying another unit aligns with the social optimum, thus making the market efficient.

When a Tax Is Imposed on a Market with a Negative