Assume that the city government of Pollutersville taxes the production of electricity in an effort to make the market internalize the external cost imposed on society in the form of air pollution that is created when coal is burned to produce electricity. a. Draw a supply and demand diagram for electricity in Pollutersville. Be sure to label your axes, curves, and intercepts, as well as MSC, MSB, MPC, MSB curves and the amount of the tax. b. If the government imposes a tax equal to the amount of the marginal external cost generated by each kwh of electricity, is there any deadweight loss in the market? Explain in one sentence of less. c. Discuss the changes in welfare for consumers, producers, society, and those individuals affected by the pollution once the tax is imposed.

Assume that the city government of Pollutersville taxes the production of electricity in an effort to make the market internalize the external cost imposed on society in the form of air pollution that is created when coal is burned to produce electricity. a. Draw a supply and demand diagram for electricity in Pollutersville. Be sure to label your axes, curves, and intercepts, as well as MSC, MSB, MPC, MSB curves and the amount of the tax. b. If the government imposes a tax equal to the amount of the marginal external cost generated by each kwh of electricity, is there any deadweight loss in the market? Explain in one sentence of less. c. Discuss the changes in welfare for consumers, producers, society, and those individuals affected by the pollution once the tax is imposed.

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter13: Positive Externalities And Public Goods

Section: Chapter Questions

Problem 24P: Assume that the marginal private costs of a film producing fuel-efficient can; is greater than the...

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