The firms in a perfectly competitive market for a good create pollution, the costs of which do not enter into the firms' costs. The government decides to impose a domestic Pigovian tax, t, as a way of addressing this problem. Figure 11 shows this scenario. Price P1 P2 P3 MC5 MCp+t MC-S D Q1 Q2 03 Quantity Figure 11: A Pigovian tax on suppliers Based on Figure 11, select the correct answer to match this description: The quantity demanded after the tax is implemented a. Q1 ○ b. Q₂ ○ C. Q3

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Q: Why is the average cost curve U-shaped?

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A: Average Fixed Cost is the total fixed cost per unit of output.  AFC = TFC/Q

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A: Solution is given below

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A: Total cost includes all the costs incurred for producing the product.

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Q: 51. Which cost increases continuously with the increase in production?

A: To find : Which cost increases continuously with the increase in production.

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Q: 37. All the following curves are U- shaped except

A: Answer is given below