If a polluting producer is forced to pay a pollution charge,what is the effect on the supply and demand curves for the product?
A) The quantity supplied along the firm's supply curve increases.
B) The firm's demand curve shifts leftward.
C) The firm's supply curve shifts rightward.
D) The firm's supply curve shifts leftward.
E) Both the supply curve and the demand curve shift leftward.

Question

Quizplus · Accepted Answer

If a polluting producer is forced to pay a pollution charge, the cost of production increases, causing the firm to supply less at every given price level, shifting the supply curve leftward. This means that the equilibrium point moves up along the demand curve, resulting in higher prices and a lower quantity of the product being sold. Therefore, the answer is D as it correctly states that the supply curve shifts leftward only.

If a Polluting Producer Is Forced to Pay a Pollution