Suppose that electricity producers create a negative externality equal to $6 per unit. Further suppose that the government imposes a $8 per-unit tax on the producers. What is the relationship between the after-tax equilibrium quantity and the socially optimal quantity of electricity to be produced?
a. They are equal.
b. The after-tax equilibrium quantity is greater than the socially optimal quantity.
c. The after-tax equilibrium quantity is less than the socially optimal quantity.
d. There is not enough information to answer the question.
c
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Network externalities
A) prevent the dominance of a market by one firm. B) are created when celebrity endorsements of products lead to a surge in the demand for those products. C) exist when the usefulness of a product increases with the number of consumers who use it. D) can only exist when there are economies of scale.
Which national income account should be examined to discover trends in the after-tax income that people have to save and spend?
a. Gross domestic product (GDP) b. Gross national product (GNP) c. Disposable personal income (DI) d. National income (NI)