Use the following to answer question(s): Model of a Competitive Market

-(Exhibit: Model of a Competitive Market) If there are external costs, a tax imposed on sellers will:
A) decrease the equilibrium quantity.
B) increase the equilibrium quantity.
C) have no effect on the equilibrium price.
D) decrease the equilibrium price.

Question

Use the following to answer question(s): Model of a Competitive Market
 
-(Exhibit: Model of a Competitive Market) If there are external costs, a tax imposed on sellers will:
A) decrease the equilibrium quantity. 
B) increase the equilibrium quantity. 
C) have no effect on the equilibrium price. 
D) decrease the equilibrium price.

Quizplus · Accepted Answer

A tax imposed on sellers will increase the cost of production, resulting in a decrease in supply. This will lead to a decrease in the equilibrium quantity. Therefore, the best choice is A.

Use the Following to Answer Question(s): Model of a Competitive