MC Qu 27 Use the following supply and demand Use the followi

MC Qu. 27 Use the following supply and demand... Use the following supply and demand graph for product X to answer the question below. Q1 Quantity of Product What would happen if the government taxed the producers of this product because it has negatve externalities in production? Multiple Choice supply would increase demand would decrease

Solution

1.

If the government taxes the producer of the product because it has negative externalities in production, supply would decrease.

the correct option (c)

2.

If there are positive externalities from the consumption of product X then socially optimal demand curve would be to the right of the existing D demand curve

the correct option is (b)