The figure below shows the demand, supply and marginal social cost curves for a steel plant.

-Refer to the scenario above. If the government imposes a tax of_____ , output will_____ .

Question

The figure below shows the demand, supply and marginal social cost curves for a steel plant.
 
-Refer to the scenario above. If the government imposes a tax of_____ , output will_____ .

Quizplus · Accepted Answer

A tax of $10 would increase the cost of production, leading to a decrease in supply. This would result in a lower quantity of output, falling below the socially optimal level where marginal social cost equals marginal social benefit.

The Figure Below Shows the Demand, Supply and Marginal Social