(Figure: A Competitive Market in the Presence of Externalities) Use Figure: A Competitive Market in the Presence of Externalities. Given the figure, if there are external costs, a tax imposed on sellers will:

Question

Quizplus · Accepted Answer

A tax on sellers increases the cost of production for the suppliers, which shifts the supply curve upward to the left. This reduces the quantity of the good produced and sold in the market, leading to a decrease in equilibrium quantity. The price paid by consumers may increase, decrease, or remain the same depending on the size of the tax and the relative slopes of the demand and supply curves. However, the equilibrium price is not specified in this figure, so it cannot be determined from this information alone.

(Figure: a Competitive Market in the Presence of Externalities) Use