Question 43A government imposition designed to internalize a positive externalityO Cap and tradePigouvian taxO Pigouvian subsidyO Tradable pollution permits

Externality is that cost / benefit associated with an activity that is received by a person who is…

Answered: A government imposition designed to…

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A government imposition designed to internalize a positive externality O Cap and trn

Economics (MindTap Course List)

13th Edition

ISBN:9781337617383

Author:Roger A. Arnold

Publisher:Roger A. Arnold

Chapter30: Market Failure: Externalities, Public Goods, And Asymmetric Information

Section: Chapter Questions

Problem 8QP

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Table 12.12, shows the supply and demand conditions for a firm that will play trumpets on the streets when requested. QS1 is the quantity supplied without social costs. QS2 is the quantity supplied with social costs. What is the negative externality in this situation? Identify the equilibrium price and quantity when we account only for private costs, and then when we account for social costs. How does accounting for the externality affect the equilibrium price and quantity?
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