Question
Asked Dec 6, 2019
27 views
Is the answer A B C or D? 
8:27
K All iCloud
If negotiation is impractical, the socially
optimal level of production can be achieved
by:
300
Social MC
250
Private MC
200
150
100
50
100 200 300 400 500 600
Quantity (tons of paper per year)
A) imposing a tax on paper equal to the
external cost.
B) subsidizing paper by the amount of the the
external benefit.
C) compensating those injured by the
externality.
D) banning production of paper.
Price ($/ton)
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8:27 K All iCloud If negotiation is impractical, the socially optimal level of production can be achieved by: 300 Social MC 250 Private MC 200 150 100 50 100 200 300 400 500 600 Quantity (tons of paper per year) A) imposing a tax on paper equal to the external cost. B) subsidizing paper by the amount of the the external benefit. C) compensating those injured by the externality. D) banning production of paper. Price ($/ton)

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Expert Answer

Step 1

Externality arises whenever the action of one person has either negative or positive impact on others, where the first person neither receives the benefit nor bears the cost of his actions.

The figure ...

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