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Suppose a Tax Equal to the Value of the Marginal

Question 98

Multiple Choice

Suppose a tax equal to the value of the marginal external cost at the optimal output is imposed on a pollution generating good. All of the following will result from the tax except


A) an increase in the equilibrium market price.
B) a decrease in the equilibrium quantity produced and consumed.
C) a decrease in market supply of the good.
D) an increase in the demand for the good.

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