The diagram to the right illustrates a competitive industry in which there is a negative production externality. If a tax equal to $20/unit (i.e., a tax equal to the marginal external cost) is imposed, then the net social benefit will OA. fall by area A+ C. OB. rise by area B+C. OC. fall by area C. OD. rise by area B. OE. None of the above. W Marginal Benefit, Marginal Cost ($) 50 MCS MCp 45 35 30- 25 20 15 10- 5 0- 0 B D 10 20 30 40 50 60 70 80 90 100 110 Quantity -6°C Mostly clear Next
The diagram to the right illustrates a competitive industry in which there is a negative production externality. If a tax equal to $20/unit (i.e., a tax equal to the marginal external cost) is imposed, then the net social benefit will OA. fall by area A+ C. OB. rise by area B+C. OC. fall by area C. OD. rise by area B. OE. None of the above. W Marginal Benefit, Marginal Cost ($) 50 MCS MCp 45 35 30- 25 20 15 10- 5 0- 0 B D 10 20 30 40 50 60 70 80 90 100 110 Quantity -6°C Mostly clear Next
Microeconomics: Private and Public Choice (MindTap Course List)
16th Edition
ISBN:9781305506893
Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Chapter5: Difficult Cases For The Market And The Role Of Government
Section: Chapter Questions
Problem 5CQ
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Question
Transcribed Image Text:The diagram to the right illustrates a competitive industry
in which there is a negative production externality. If a tax
equal to $20/unit (i.e., a tax equal to the marginal
external cost) is imposed, then the net social benefit will
OA. fall by area A+ C.
OB. rise by area B+C.
OC. fall by area C.
OD. rise by area B.
OE. None of the above.
W
Marginal Benefit, Marginal Cost ($)
50
MCS
MCp
45
35
30-
25
20
15
10-
5
0-
0
B
D
10 20 30 40 50 60 70 80 90 100 110
Quantity
-6°C Mostly clear
Next
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