Some policymakers have argued that products like cigarettes, alcohol, and sweetened soda generate negative externalities in consumption.If the government decided to impose a tax on soda, the government will cause
A)consumers to internalize the externality.
B)producers to internalize the externality.
C)the external cost to drinking soda to become a private cost paid by the government.
D)the external cost to drinking soda to become a private cost paid by producers.

Question

Quizplus · Accepted Answer

By imposing a tax on soda, the price will increase and consumers will be discouraged from purchasing soda. This will cause consumers to internalize the negative externality of consuming soda, as they will now bear the cost of the tax. This will likely lead to decreased consumption and a reduction in the negative externalities associated with soda consumption. Producers may also be affected if the tax leads to decreased demand for their products, but the primary goal of the tax is to encourage consumers to internalize the externality. Options C and D are not accurate because the cost of the tax is not paid by the government or the producers - it is paid by the consumers who choose to purchase soda.

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