Alcohol taxes that are used by government as an incentive for distillers and beer wholesalers to cut back on their alcohol sales which create external costs are called Sales taxes a. Marketable permits Ob. Subsidies C. Pigouvian taxes Od.

Give some instances of environmental issues that the Pigovian tax can be used to resolve.

In a perfectly competitive market for a good with a downward sloping demand curve and an upward sloping supply curve, the marginal social benefit is greater than the marginal social cost at the market equilibrium quantity. The government imposition of a new per-unit tax on the production of the good would a. increase consumer surpluses b. increase producer surplus c. increase deadweight loss d. have no effect on the price of the good e. increase the quantity sold of the good Please choose the best answer, explain why you chose that answer (include a graph as well), and justify why all the other answers are wrong.

Use Exhibit to answer question a. C + D + F. b. C + F. C. A + B + C + D. d. D. Price e. A + B + E. PB Po Ps AIBI В C Size of tax per unit w F Q₁ If there is no tax placed on the product in this market, producer surplus is the area Supply Demand Quantity