What is the result of a $75 per-tuba tax, payable

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Question: Assume a perfectly competitive market for tubas where short-run supply is upward sloping and demand is downward sloping. Each tuba purchased imposes a $100 cost on the purchaser's neighbours. What is the result of a $75 per-tuba tax, payable by the seller?

a) There is no change in deadweight loss because the buyer imposes the externality.

b) While deadweight loss will decrease, market quantity will still be greater than the efficient quantity. c) Deadweight loss will be eliminated as the market quantity will be the efficient quantity.

d) While deadweight loss will decrease, but market quantity will now be less than the efficient quantity. e) Deadweight loss may increase or decreases because market we do not know whether market quantity will be greater than or less than the efficient quantity.

Reference no: EM133344105

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