A tax may be used as a corrective device in the case of a negative externality because it will __________ marginal private costs and __________ supply.
A)increase; decrease
B)increase; increase
C)decrease; decrease
D)decrease; increase

Question

Quizplus · Accepted Answer

A tax on a good with a negative externality increases the marginal private costs to producers, which typically leads to a decrease in supply as it becomes more expensive to produce and sell the good.

A Tax May Be Used as a Corrective Device in the Case