Asked by Lopez Anibal on Jul 12, 2024
Verified
If a tax is placed on perfectly competitive firms that impose external costs on society, the firm's marginal cost curve will shift ________ and the industry supply curve will shift to the ________.
A) down; left
B) down; right
C) up; right
D) up; left
Marginal Cost Curve
A graphical representation showing the increase in total cost that arises from producing one additional unit of a good or service.
Industry Supply
The total quantity of a good or service that all producers in a market are willing and able to sell at various prices.
- Investigate the influence of taxes and subsidies on the actions of firms and the results in the market.
- Determine the circumstances under which market-driven approaches can assimilate externalities and reinstate efficiency.
Verified Answer
JA
Jonathan AguilarJul 15, 2024
Final Answer :
D
Explanation :
When a tax is placed on firms that impose external costs, it effectively increases their cost of production. This causes the firm's marginal cost curve to shift up, reflecting higher costs at each level of output. Consequently, the industry supply curve shifts to the left, indicating a decrease in the total quantity supplied at each price level, as it becomes more costly for firms to produce.
Learning Objectives
- Investigate the influence of taxes and subsidies on the actions of firms and the results in the market.
- Determine the circumstances under which market-driven approaches can assimilate externalities and reinstate efficiency.