A competitive tire manufacturing industry spews emissions into the air at a marginal cost of 1.5-q, where q is the quantity of tires produced per month (in thousands). The industry marginal cost, excluding the cost of emissions (private marginal cost), is 4 + 4-q, expressed in $ per tire. The inverse demand curve for tires is p = 480 -3-q, also expressed in $ per tire. In order to achieve the socially efficient level of tire production, which takes into account the optimal level of air pollution, the government levies a tax on the industry. What is the efficient pollution tax?

A competitive tire manufacturing industry spews emissions into the air at a marginal cost of 1.5-q, where q is the quantity of tires produced per month (in thousands). The industry marginal cost, excluding the cost of emissions (private marginal cost), is 4 + 4-q, expressed in $ per tire. The inverse demand curve for tires is p = 480 -3-q, also expressed in $ per tire. In order to achieve the socially efficient level of tire production, which takes into account the optimal level of air pollution, the government levies a tax on the industry. What is the efficient pollution tax?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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