Consider the market for beautiful gardens, planted by master gardeners. The private value of Q units of garden to the owners of those gardens is given by PMB = 40 - Q. The cost for building such lovely gardens is PMC = Q, which is paid for entirely by the owner of the garden. Other people enjoy seeing such nice gardens, and the gardens therefore contribute to making passers-by happy, to a total value of 30 per unit of garden. Mathematically, this externality is expressed by: SMB = PMB + 30. Which of the following policies would incentivize the creation of the socially optimal amount of gardens? %3D %3D O A Pigovian subsidy of 20 per unit to gardeners. ) A Pigovian tax of 20 per unit on gardeners. A standard requiring everyone to build 20 units worth of gardens. A Pigovian subsidy of 30 per unit to gardeners.

Consider the market for beautiful gardens, planted by master gardeners. The private value of Q units of garden to the owners of those gardens is given by PMB = 40 - Q. The cost for building such lovely gardens is PMC = Q, which is paid for entirely by the owner of the garden. Other people enjoy seeing such nice gardens, and the gardens therefore contribute to making passers-by happy, to a total value of 30 per unit of garden. Mathematically, this externality is expressed by: SMB = PMB + 30. Which of the following policies would incentivize the creation of the socially optimal amount of gardens? %3D %3D O A Pigovian subsidy of 20 per unit to gardeners. ) A Pigovian tax of 20 per unit on gardeners. A standard requiring everyone to build 20 units worth of gardens. A Pigovian subsidy of 30 per unit to gardeners.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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