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Question
If government regulation forces firms in an industry to internalize the externality, then we can expect the equilibrium price of the good to ________ and the equilibrium quantity to ________.
a. increase; increase
b. increase; decrease
c. decrease; decrease
d. decrease; increase
e. increase; remain unchanged
Answer
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Related questions
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What is the long-run consequence of a price ceiling law?
a. A surplus will continue to exist and will grow larger over time.
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Suppose Solomon lives in a community with no price controls. What do you expect will happen if his town borders a community where there is a binding price ceiling on most products?
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