Corrective Tax for a Negative Externality
In an industry that generates negative externalities, a corrective per-unit tax is imposed to move production closer to the socially optimal level. What are the expected effects on the industry’s market output and employment?
A
Market output decreases while employment increases due to government intervention.
B
Market output increases while employment declines.
C
Market output decreases and employment declines.
D
Market output remains unchanged but employment decreases.
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