No SPAM!! ONLY answer full STEP by STEP solution BY HAND . Why option C is true? Costs, Benefits € MNPB МЕС Таx t Qs Qp Output To internalize the external cost, the authorities have established pollution Tax t (per unit of pollution). Which one of the following statements is true? a. Tax t is the Pigouvian pollution tax (as per this Figure). b. Tax t has been set too low and as a result leads to under-production. Tax t has been set too low and leads to over-production with marginal external cost d, that is higher than the optimum level. d. Tax t has been set too high and is leading to over-production with marginal external cost d, that is higher than the optimum level. Why option C is true?
No SPAM!! ONLY answer full STEP by STEP solution BY HAND . Why option C is true? Costs, Benefits € MNPB МЕС Таx t Qs Qp Output To internalize the external cost, the authorities have established pollution Tax t (per unit of pollution). Which one of the following statements is true? a. Tax t is the Pigouvian pollution tax (as per this Figure). b. Tax t has been set too low and as a result leads to under-production. Tax t has been set too low and leads to over-production with marginal external cost d, that is higher than the optimum level. d. Tax t has been set too high and is leading to over-production with marginal external cost d, that is higher than the optimum level. Why option C is true?
Chapter19: Externalities And Public Goods
Section: Chapter Questions
Problem 19.9P
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Transcribed Image Text:No SPAM!! ONLY answer full STEP by STEP
solution BY HAND . Why option C is true?
Costs,
Benefits €
MNPB
МЕС
Таx t
Qp
Output
To internalize the external cost, the authorities have established pollution Tax 1 (per unit of
pollution). Which one of the following statements is true?
a. Tax t is the Pigouvian pollution tax (as per this Figure).
b. Tax t has been set too low and as a result leads to under-production.
Tax t has been set too low and leads to over-production with marginal external cost d,
that is higher than the optimum level.
d. Tax t has been set too high and is leading to over-production with marginal external
cost d, that is higher than the optimum level.
Why option C is true?
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