Bobs Bees is a small boutique honey manufacturer in Massachusetts. Bobs neighbor is Jons Jams. The more
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a. Suppose that the government of Massachusetts imposes a new tax on jam and honey production. Will the deadweight loss of this tax be greater, smaller, or the same as if there were no production externality? Explain.
b. How would your answer change if the production externality were negative (perhaps because Bob’s bees sting Jon’s jam makers)?
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