Answer to Question #157640 in Economics for stephanie maree

Question #157640
  1. Explain how a carbon tax can affect the equilibrium market quantity of fossil fuels and the socially optimal quantity of fossil fuels.
1
Expert's answer
2021-01-24T16:34:37-0500

The carbon tax may have a downward impact on the market equilibrium of fossil fuels since the introduction of this tax will lead to the rapid growth of alternative energy technologies and by limiting the demand for energy sources related to minerals.

Also, the tax can negatively affect the socially optimal fossil fuel, since fossil fuels are often used by the poorest segments of the population, that is, the imposed tax should be introduced taking into account the needs of various segments of the population.


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