-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

Imposing an effluent fee on steel mills for pollution increases their production costs. This leads to a decrease in supply, shifting the supply curve to the left. As a result, the equilibrium price increases from P1 to P2, and the equilibrium quantity decreases from Q1 to Q2.

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