Question: A study finds that leaf blowers make too much noise, so the government imposes a $10 tax on the sale of every unit to correct

A study finds that leaf blowers make too much noise, so the government imposes a $10 tax on the sale of every unit to correct for the social cost of the noise pollution. The tax completely internalizes the externality. Before the corrective tax, Blown Away Manufacturing regularly sold blowers for $100. After the tax is in place, the consumer price for leaf blowers rises to $105.
a. Describe the impact of the tax on the number of leaf blowers sold.
b. What is the socially optimal price to the consumer?
c. What is the private market price?
d. What net price is Blown Away receiving after it pays the tax?

Step by Step Solution

3.47 Rating (180 Votes )

There are 3 Steps involved in it

1 Expert Approved Answer
Step: 1 Unlock

a The impact of tax on the leaf bowlers sold If the tax is imposed on t... View full answer

blur-text-image
Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock
Step: 3 Unlock

Document Format (1 attachment)

Word file Icon

1019-B-M-A-P-C(4027).docx

120 KBs Word File

Students Have Also Explored These Related Managerial Accounting Questions!