In a free-market economy, a product that entails a negative externality (additional social cost) will be

In a free-market economy, a product that entails a negative externality (additional social cost) will be underproduced. A free-market economy is when the government has little or no restrictions and regulations on buyers and sellers in the market. They are essentially 'free' of all control and can base their inputs and outputs off of supply and demand. If there is a negative externality, then there too few items being produced in the economy.

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"we first find value of tax in dollars.

the difference between the two prices   is: 23. 54 - 22 = 1.54

therefore the sales tax in dollars is 1.54

the tax % will be   (amount of tax / original cost price ) × 100

(1.54 / 22) × 100  → (0.07) × 100 =   7

so the tax rate is 7%

we can double check the answer.

7 % of 22   → (7/100) × 22 → 0.07 × 22 = 1.54

22 + 1.54 = 23.54"