Suppose that demand for anchovy pizza is given by PD = 50 – Q", and the supply of anchovy pizza is given by PS = Q$. Anchovy pizza smells bad. The bad smell imposes an external cost on anyone near the pizza equal to $5 per pizza. If the government wanted to correct the externality in the market for anchovy pizza and induce it to produce the socially efficient quantity of pizza, which policy should it adopt? Subsidy of $10 Tax of $5 Subsidy of $5 O Tax of $10

Suppose that demand for anchovy pizza is given by PD = 50 – Q", and the supply of anchovy pizza is given by PS = Q$. Anchovy pizza smells bad. The bad smell imposes an external cost on anyone near the pizza equal to $5 per pizza. If the government wanted to correct the externality in the market for anchovy pizza and induce it to produce the socially efficient quantity of pizza, which policy should it adopt? Subsidy of $10 Tax of $5 Subsidy of $5 O Tax of $10

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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