PRICE OF GOOD X P3 P₂ P₁ 0 Q₁ Q₂ Q3 Marginal Social Cost Marginal Private Cost Marginal Social Benefit QUANTITY OF GOOD X To correct for the negative externality shown in the graph above, the government should: provide a subsidy in the amount of P3-P2 to firms that are producing Good "X" provide a subsidy in the amount of P4-P₂ to firms that are producing Good "X" implement a tax in the amount of P4-P2 to firms that are producing Good "X" implement a tax in the amount of P3-P2 to firms that are producing Good "X" do nothing as this market is already operating at the socially efficient level of output

PRICE OF GOOD X P3 P₂ P₁ 0 Q₁ Q₂ Q3 Marginal Social Cost Marginal Private Cost Marginal Social Benefit QUANTITY OF GOOD X To correct for the negative externality shown in the graph above, the government should: provide a subsidy in the amount of P3-P2 to firms that are producing Good "X" provide a subsidy in the amount of P4-P₂ to firms that are producing Good "X" implement a tax in the amount of P4-P2 to firms that are producing Good "X" implement a tax in the amount of P3-P2 to firms that are producing Good "X" do nothing as this market is already operating at the socially efficient level of output

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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