Production of good X imposes costs on people who are neither producers nor consumers of good X.

a) A senator proposes a per-unit sales tax on good X. Show graphically how this tax will affect each of the following:

1. The price paid by consumers

2. The quantity of good X produced.

3. The total after-tax revenues received by producers of good X.

b) Explain how imposing this tax might result in greater economic efficiency than would be achieved in an unregulated competitive market.