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The market for good Q is perfectly competitive. However, it features negative externalities. In the equilibrium of this market, the perfect competition quantity is Qpc=5. The socially efficient quantity is QsOC-3. The production of this good generates a marginal external cost MEC=4+Q. To achieve efficiency, the government can introduce a

The market for good Q is perfectly competitive. However, it features negative externalities. In the equilibrium of this market, the perfect competition quantity is Qpc=5. The socially efficient quantity is QsOC-3. The production of this good generates a marginal external cost MEC=4+Q. To achieve efficiency, the government can introduce a

Economics For Today
Economics For Today
10th Edition
ISBN:9781337613040
Author:Tucker
Publisher:Tucker
Chapter14: Environmental Economics
Section: Chapter Questions
Problem 11SQ
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The market for good Q is perfectly competitive. However, it features negative externalities. In the equilibrium of this market, the perfect competition quantity is Qpc=5. The socially efficient quantity is QsOC=3. The production of this good generates a marginal external cost MEC=4+Q. To achieve efficiency, the government can introduce a $2 per unit tax $2 per unit subsidy $3 per unit tax $3 per unit subsidy $4 per unit tax $4 per unit subsidy $5 per unit tax $5 per unit subsidy $7 per unit tax $7 per unit subsidy $9 per unit tax $9 per unit subsidy $12 per unit tax $12 per unit subsidy
Transcribed Image Text:The market for good Q is perfectly competitive. However, it features negative externalities. In the equilibrium of this market, the perfect competition quantity is Qpc=5. The socially efficient quantity is QsOC=3. The production of this good generates a marginal external cost MEC=4+Q. To achieve efficiency, the government can introduce a $2 per unit tax $2 per unit subsidy $3 per unit tax $3 per unit subsidy $4 per unit tax $4 per unit subsidy $5 per unit tax $5 per unit subsidy $7 per unit tax $7 per unit subsidy $9 per unit tax $9 per unit subsidy $12 per unit tax $12 per unit subsidy
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