-According to the above figure, if steel mills are charged an effluent fee in order to bear the cost of pollution, what happens to the equilibrium price and equilibrium quantity?
A)They are unchanged.
B)They change from P₁ and Q₁ to P₂ and Q₂.
C)They change from P₂ and Q₂ to P₁ and Q₁.
D)The equilibrium price increases from P₁ and P₂, but the equilibrium quantity is unchanged.

Question

-According to the above figure, if steel mills are charged an effluent fee in order to bear the cost of pollution, what happens to the equilibrium price and equilibrium quantity?
A)They are unchanged. 
B)They change from P₁ and Q₁ to P₂ and Q₂. 
C)They change from P₂ and Q₂ to P₁ and Q₁. 
D)The equilibrium price increases from P₁ and P₂, but the equilibrium quantity is unchanged.

Quizplus · Accepted Answer

Charging an effluent fee increases the cost of production for steel mills, leading to a decrease in supply. This results in a higher equilibrium price and a lower equilibrium quantity, moving from P₁ and Q₁ to P₂ and Q₂.

-According to the Above Figure, If Steel Mills Are Charged