If consumers of common resources were subject to a tax equal to the external costs imposed due to the negative externality created:
A)an efficient level would be reached.
B)total surplus would be maximized for society.
C)individuals would consume less.
D)All of these are true.

Question

Quizplus · Accepted Answer

Imposing a tax equal to the external costs aligns private costs with social costs, leading to efficient resource use (A), maximizes total surplus by reducing overconsumption (B), and incentivizes individuals to consume less to avoid the tax (C).

If Consumers of Common Resources Were Subject to a Tax