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Question

The government imposes a tax on the sale of a good whose production is creating a negative externality. The value of the tax is $4 per unit sold. In the new equilibrium, we would expect

a. the same amount to be sold and the price to be $4 higher.

b. the same amount to be sold and the price to increase by less than $4.

c. less to be sold and the price to increase by $4.

d. less to be sold and the price to increase by less than $4.

e. less to be sold and the price to increase by more than $4.

Answer

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