a. Label the equilibrium price and quantity (if there are no externalities in this market) as Po and Qo respectively. b. The paper manufacturer creates a negative externality for society as part of paper production. Make an addition to this diagram to reflect that negative externality. c. Given the change you made in part b, label the socially-optimal price and quantity as P1 and Qi respectively. с. d. Suggest a government action that could make the paper manufacturer take into account the negative externality.
a. Label the equilibrium price and quantity (if there are no externalities in this market) as Po and Qo respectively. b. The paper manufacturer creates a negative externality for society as part of paper production. Make an addition to this diagram to reflect that negative externality. c. Given the change you made in part b, label the socially-optimal price and quantity as P1 and Qi respectively. с. d. Suggest a government action that could make the paper manufacturer take into account the negative externality.
Chapter17: Market Failure: Externalities, Public Goods, And Asymmetric Information
Section: Chapter Questions
Problem 12QP
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