By requiring car producers to install emission control devices on cars, the government forces these producers to internalize some of the external costs of auto pollution. This will lead to the equilibrium
Price of cars
A) decreasing and the quantity increasing.
B) decreasing and the quantity decreasing.
C) increasing and the quantity increasing.
D) increasing and the quantity decreasing.

Question

Quizplus · Accepted Answer

When car producers are required to install emission control devices, the production cost increases. This higher cost is typically passed on to consumers in the form of higher prices, leading to an increase in the price of cars. As prices rise, the quantity of cars demanded at those higher prices tends to decrease, leading to a decrease in the quantity of cars sold.

By Requiring Car Producers to Install Emission Control Devices on Cars