Suppose that meat producers create a negative externality.Further suppose that the government imposes a tax on the producers equal to the per-unit externality.What is the relationship between the equilibrium quantity and the socially optimal quantity of meat to be produced?
A)They are equal.
B)The equilibrium quantity is greater than the socially optimal quantity.
C)The equilibrium quantity is less than the socially optimal quantity.
D)There is not enough information to answer the question.

Question

Quizplus · Accepted Answer

When the government imposes a tax equal to the per-unit externality, it internalizes the external cost, aligning the equilibrium quantity with the socially optimal quantity.

Suppose That Meat Producers Create a Negative Externality