Some policymakers have argued that products like cigarettes, alcohol, and sweetened soft drinks generate negative externalities in consumption.All else equal, if the government decided to impose a tax on pop, the equilibrium quantity of pop would ________ and the equilibrium price of soda would ________.

Question

Quizplus · Accepted Answer

Imposing a tax on pop would increase its price to consumers. This would result in a decrease in demand for the product, leading to a decrease in equilibrium quantity. Meanwhile, the tax would increase the cost of production for firms, causing them to increase the price to consumers. Therefore, the equilibrium price of soda would increase.

Some Policymakers Have Argued That Products Like Cigarettes, Alcohol, and Sweetened