Some policymakers have argued that products like cigarettes, alcohol, and sweetened soda generate negative externalities in consumption.All else equal, if the government decided to impose a tax on soda, the equilibrium quantity of soda would ________ and the equilibrium price of soda would ________.
A)increase; increase
B)increase; decrease
C)decrease; increase
D)decrease; decrease

Question

Quizplus · Accepted Answer

A tax on soda would increase the cost of production for soda manufacturers, leading to a decrease in the equilibrium quantity of soda. The decrease in supply would also lead to an increase in the equilibrium price of soda.

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