For the market with pollution in Figure 18.1, what constant, specific tax, (t), on output could the
Question:
For the market with pollution in Figure 18.1, what constant, specific tax, \(t\), on output could the government set to maximize welfare?
Data From Figure 18.1:-
Transcribed Image Text:
p, $ per ton of paper 450 A Ps = 282 B =240 P = 198 84 FL G MCs = MCP + MC9 es H E 80 MCP MC9 30 Demand 0 Q=84 Q=105 225 Q, Tons of paper per day Social Optimum Consumer Surplus, CS Private Producer Surplus, PSp A B+C+F+G Private A+B+C+D Change B+C+D F+G+H H-B-C Externality Cost, Cg C+G C+D+E+G+H D+E+H Social Producer Surplus, PSs = PSp - Cg B+F F-C-D-E -B-C-D-E Welfare, W = CS+ PS A+ B+ F A+B+F-E -E=DWL
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