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This graph represents the tobacco industry. ↑Price 16- 14 - Social Cost 12- 10- Private Cost 8- 6 4 Demand 200 500 650 Оuantily What is the socially optimal price and quantity? What should the government do (impose a tax or provide a subsidy) to internalize this externality? What is the amount of the the corrective tax/subsidy needed to be to move the outcome from the market equilibrium to the socially-optimal outcome?

This graph represents the tobacco industry. ↑Price 16- 14 - Social Cost 12- 10- Private Cost 8- 6 4 Demand 200 500 650 Оuantily What is the socially optimal price and quantity? What should the government do (impose a tax or provide a subsidy) to internalize this externality? What is the amount of the the corrective tax/subsidy needed to be to move the outcome from the market equilibrium to the socially-optimal outcome?

Microeconomics: Private and Public Choice (MindTap Course List)
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 10CQ
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This graph represents the tobacco industry. ↑Price 16- 14 - Social Cost 12- 10- Private Cost 8- 6 4 Demand 200 500 650 Оuantily What is the socially optimal price and quantity? What should the government do (impose a tax or provide a subsidy) to internalize this externality? What is the amount of the the corrective tax/subsidy needed to be to move the outcome from the market equilibrium to the socially-optimal outcome?
Transcribed Image Text:This graph represents the tobacco industry. ↑Price 16- 14 - Social Cost 12- 10- Private Cost 8- 6 4 Demand 200 500 650 Оuantily What is the socially optimal price and quantity? What should the government do (impose a tax or provide a subsidy) to internalize this externality? What is the amount of the the corrective tax/subsidy needed to be to move the outcome from the market equilibrium to the socially-optimal outcome?
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