The following graph shows the marginal social cost (MSC), the marginal private cost (MPC), and the marginal social benefit (MSB) of a good. MSC S = MPC $3.00 $2.50 $2.00 $1.50 $1.00 D = MSB 20 40 60 80 Quantity If the government wants the firm to internalize the externality, the government can do so by A doing nothing imposing a per-unit tax of $0.50 imposing a per-unit tax of $1.00 D granting a per-unit subsidy of $0.50 E granting a per-unit subsidy of $1.50

The following graph shows the marginal social cost (MSC), the marginal private cost (MPC), and the marginal social benefit (MSB) of a good. MSC S = MPC $3.00 $2.50 $2.00 $1.50 $1.00 D = MSB 20 40 60 80 Quantity If the government wants the firm to internalize the externality, the government can do so by A doing nothing imposing a per-unit tax of $0.50 imposing a per-unit tax of $1.00 D granting a per-unit subsidy of $0.50 E granting a per-unit subsidy of $1.50

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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