2. The PMB associated with a product's consumption is PMB = 360 – 4Q and thePMC = 6Q. The marginal external damage associated with this good's production isMD = 2Q. To correct the externality, the gov. decides to impose a tax of T per unitsold.a) What is the socially optimal level of production?b) What tax should the government set to achieve the social optimum?c) What is the level of production without pollution?d) Construct a single graph representing the outcomes in (a), (b) & (c). It must beclearly and completely labelled.

Answered: PMC = 6Q. The marginal external damage…

Practical Management Science

6th Edition

ISBN:9781337406659

Author:WINSTON, Wayne L.

Publisher:WINSTON, Wayne L.

Chapter2: Introduction To Spreadsheet Modeling

Section: Chapter Questions

Problem 20P: Julie James is opening a lemonade stand. She believes the fixed cost per week of running the stand...

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