Now suppose that the government has to intervene in the production of the good (rice) for there is a reason to believe (as community clamors it) that the production is causing pollution in the community. With the intervention, the local government decided to impose a tax (Pigouvian tax) on the polluters (a tax per unit of the good produced). Use the figure below to answer the following: A. What is the value of the tax? B. Calculate Pigouvian tax revenue as a result of this tax levied on producers
Now suppose that the government has to intervene in the production of the good (rice) for there is a reason to believe (as community clamors it) that the production is causing pollution in the community. With the intervention, the local government decided to impose a tax (Pigouvian tax) on the polluters (a tax per unit of the good produced). Use the figure below to answer the following: A. What is the value of the tax? B. Calculate Pigouvian tax revenue as a result of this tax levied on producers
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Question
Now suppose that the government has to intervene in the production of the good (rice) for there is a reason to believe (as community clamors it) that the production is causing pollution in the community. With the intervention, the local government decided to impose a tax (Pigouvian tax) on the polluters (a tax per unit of the good produced). Use the figure below to answer the following:
A. What is the value of the tax?
B. Calculate Pigouvian tax revenue as a result of this tax levied on producers.
Transcribed Image Text:P ($)
MPC + tax
360
MPC
320
280
240
216
200
185
160-
120-
80
40
MB
+
10
20
30
40
50
60
70
80
90
Q per year
Transcribed Image Text:Suppose that the private marginal cost for a product's (rice) consumption is
given by the MB curve (or MB = 360 – 4Q) and the private marginal cost
associated with its production is given by the MPC curve (or MC = 6Q). The
diagram is presented below.
P ($)
360
MPC
320+
280+
240-
216
200+
160-
120+
80-
40+
MB
10
20
30
40
50
60
70
80
90
Q per year
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