Figure 9.10
-The pollution tax in Figure 9.10
A) reduces equilibrium output.
B) reduces pollution associated with the production of the good.
C) raises equilibrium price.
D) all of the above

Question

Figure 9.10
-The pollution tax in Figure 9.10
A) reduces equilibrium output. 
B) reduces pollution associated with the production of the good. 
C) raises equilibrium price. 
D) all of the above

Quizplus · Accepted Answer

The pollution tax in Figure 9.10 reduces equilibrium output (shifts the supply curve to the left), reduces pollution associated with the production of the good (consumers and producers will seek to reduce the amount of pollution to avoid paying the tax), and raises equilibrium price (due to the increased cost of production). Therefore, all of the above options are correct.

Figure 9.10 -The Pollution Tax in Figure 9.10