Learning Path
Question & Answer1
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Review Options3
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Explore TopicChoose the Best Answer
A
The quantity of copper produced will decrease, aligning it with the socially optimal level.
B
The price of copper will decrease, making it more affordable for consumers.
C
Producers will increase production to compensate for the tax, leading to greater environmental damage.
D
Consumers will buy more copper because the tax reduces production costs.
Understanding the Answer
Let's break down why this is correct
Answer
When a government imposes a tax on copper production that matches the difference between the marginal social cost and the marginal private cost, it aims to correct the market failure caused by environmental damage. This tax encourages producers to consider the social costs of their actions, leading them to reduce copper production to a more socially optimal level. For example, if the tax makes it too expensive for companies to produce copper at previous levels, they might cut back on output, which would help lessen the environmental harm. As a result, the overall quantity of copper supplied in the market will decrease, and this can lead to higher prices for consumers. Ultimately, this adjustment helps balance the economic activities with environmental protection, reducing the negative externalities associated with copper extraction.
Detailed Explanation
When the government taxes copper production, it makes producers think about the environmental costs. Other options are incorrect because Some might think that a tax lowers prices, but it usually raises them; It's a common mistake to think that taxes encourage more production.
Key Concepts
Taxation and Deadweight Loss
Negative Externalities
Marginal Costs
Topic
Taxation and Deadweight Loss
Difficulty
medium level question
Cognitive Level
understand
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