The figure shows the production of fertiliser by a perfectly competitive profit-maximising firm. Production of the good leads to pollution of the environment. This pollutionis an external cost to the firm. MC represents marginal cost as faced by the firm; I and II represent possible positions of the marginal social cost curve.Suppose that the government imposes a 'pollution tax' on the firm at a constantCosts and revenuerate per unit of output. Assuming that this firm is the only polluter in the industry,what effect will the tax have on the market price?- MCMove to £1IIMove to £2Remain at £3Move to £4Move to £5Q1Quantity of fertiliserQ2. Q3

Perfect competition is such a market structure where that are many buyers and many sellers. The good…

The figure shows the production of fertiliser by a perfectly competitive profit-maximising firm. Production of the good leads to pollution of the environment. This pollution is an external cost to the firm. MC represents marginal cost as faced by the firm; I and II represent possible positions of the marginal social cost curve. Costs and revenue Suppose that the government imposes a 'pollution tax' on the firm at a constant rate per unit of output. Assuming that this firm is the only polluter in the industry, what effect will the tax have on the market price? MC O Move to £1 II Move to £2 D Remain at £3 %3D O Move to £4 Move to £5 Q1 Q2 Q3 Quantity of fertiliser

The figure shows the production of fertiliser by a perfectly competitive profit-maximising firm. Production of the good leads to pollution of the environment. This pollution is an external cost to the firm. MC represents marginal cost as faced by the firm; I and II represent possible positions of the marginal social cost curve. Costs and revenue Suppose that the government imposes a 'pollution tax' on the firm at a constant rate per unit of output. Assuming that this firm is the only polluter in the industry, what effect will the tax have on the market price? MC O Move to £1 II Move to £2 D Remain at £3 %3D O Move to £4 Move to £5 Q1 Q2 Q3 Quantity of fertiliser

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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