Narrbegin Exhibit 10.2 Carbon emissions as an externality
-Assume that the private supply is 'Supply 1' and the supply including tax is 'Supply 2' (Exhibit 10.2). What is the price increase (at the equilibrium level) after the carbon tax was imposed?

Question

Narrbegin Exhibit 10.2 Carbon emissions as an externality  
-Assume that the private supply is 'Supply 1' and the supply including tax is 'Supply 2' (Exhibit 10.2). What is the price increase (at the equilibrium level) after the carbon tax was imposed?

Quizplus · Accepted Answer

The price increase at the equilibrium level after the carbon tax was imposed is $10. This is because the tax increases the cost of production for the private supplier, which in turn leads to an increase in the price of the good.