Draw a graph and explain fully the case that a private firm creates negative externalities, covering the output quantities, prices and profits that occur and should be set for social optimum. After that, add and explain fully how the government can use Pigou tax to solve the above negative externalities problems and obtain the social optimum. (Your points depend on the full dynamic details)

Draw a graph and explain fully the case that a private firm creates negative externalities, covering the output quantities, prices and profits that occur and should be set for social optimum. After that, add and explain fully how the government can use Pigou tax to solve the above negative externalities problems and obtain the social optimum. (Your points depend on the full dynamic details)

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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This is an end-of-chapter problem that I'm struggling with! thanks!