Assume the government places an optimal Pigouvian tax on electricity used at night to reduce light pollution so that people can enjoy the stars.
Assume the government places an optimal Pigouvian tax on electricity used at night to reduce light pollution so that people can enjoy the stars.
Chapter8: Market Failure
Section: Chapter Questions
Problem 2P: Draw a standard supply and demand diagram for televisions, and indicate the equilibrium price and...
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Pollution from the bright city lights makes it nearly impossible to stargaze within a city setting. The supply (private cost) and demand for electricity used in city lighting are shown in the graph.
Suppose the external cost for an additional kilowatt hour of electricity is 5 cents. Drag the endpoints of the green line to draw in the
Price of electricity (cents per kWh)Quantity of electricity (kWh)01020304050SupplyDemandOSocial cost of light pollution
Assume the government places an optimal Pigouvian tax on electricity used at night to reduce light pollution so that people can enjoy the stars.
As a result of the Pigouvian tax,
consumers pay a higher price for electricity at night and producers increase output.
consumers pay a lower price for electricity and producers also lower output.
consumers pay a higher price for electricity and producers lower output.
consumers pay a lower price for electricity and producers increase output.
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