Consider a market for a good whose consumption creates a negative externality, resulting in a market equilibrium quantity that is higher than the socially optimal quantity. To address this, the government imposes a per-unit tax on consumers equal to the marginal external cost. Which statement accurately analyzes the graphical impact of this corrective tax?

Graphical Analysis of a Pigouvian Tax

In a market with a negative consumption externality, a corrective tax equal to the marginal external cost is imposed on consumers. This policy is represented graphically by an upward shift of the supply curve, which forces the market to produce at the socially optimal quantity and eliminates the deadweight loss.

Analyzing a Corrective Tax on Gasoline

In a market with a negative consumption externality, the socially optimal quantity is where MSC intersects MSB at a consumer price of 26 and a producer price of 15. At that quantity, MPB is 26. What per-unit tax on consumers reaches the social optimum, and what total price per unit do consumers pay?

Evaluating a Corrective Tax Policy

Consumer Tax, Prices, and Revenue

In a market with a negative consumption externality, a corrective per-unit tax is imposed on consumers, moving the equilibrium to the socially optimal quantity. At this optimal quantity, the vertical gap between the marginal private benefit curve and the marginal social cost curve represents the full amount of the ______.

A government imposes a corrective tax on consumers of a product that generates a negative externality. Arrange the following graphical and economic effects in the logical sequence they occur.

In a market for a product, each unit consumed creates a negative external cost of $5 for society. To address this, the government imposes a $3 per-unit tax on the consumers of this product. What is the most likely outcome of this policy?