MC₂ = SPriceDQuantityFigure 9 Demand curve and marginal private and social cost curvesTowards the right of Figure 9 are two circular red markers with a line between them thatyou can use to draw a MCp + t curve on Figure 9.You can move the markers with the mouse by clicking on them and dragging.Alternatively, you can tab to each marker and then use the keyboard arrow keys.Figure 9 shows a perfectly competitive market for a good. The supply curve S is also thesum of the firms' marginal private cost curves. The firms in this market create pollution,the costs of which do not enter into the firms' costs. The line labelled MCs is the sum ofthe firms' marginal social cost curves, including the costs of their pollution borne byothers.Assume the government decides to impose a Pigovian tax, t. Drag the line into anappropriate place on the diagram to ensure a socially optimal level of production of thegood.MC₂

Externality implies to spill-over effect of a goods or service on third party which is not…

D Quantity nd curve and marginal private and social cost curves nt of Figure 9 are two circular red markers with a line between th draw a MCp + t curve on Figure 9. he markers with the mouse by clicking on them and dragging. u can tab to each marker and then use the keyboard arrow keys

D Quantity nd curve and marginal private and social cost curves nt of Figure 9 are two circular red markers with a line between th draw a MCp + t curve on Figure 9. he markers with the mouse by clicking on them and dragging. u can tab to each marker and then use the keyboard arrow keys

Essentials of Economics (MindTap Course List)

8th Edition

ISBN:9781337091992

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter10: Externalities

Section: Chapter Questions

Problem 2PA

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Question

MC₂ = S
Price
D
Quantity
Figure 9 Demand curve and marginal private and social cost curves
Towards the right of Figure 9 are two circular red markers with a line between them that
you can use to draw a MCp + t curve on Figure 9.
You can move the markers with the mouse by clicking on them and dragging.
Alternatively, you can tab to each marker and then use the keyboard arrow keys.
Figure 9 shows a perfectly competitive market for a good. The supply curve S is also the
sum of the firms' marginal private cost curves. The firms in this market create pollution,
the costs of which do not enter into the firms' costs. The line labelled MCs is the sum of
the firms' marginal social cost curves, including the costs of their pollution borne by
others.
Assume the government decides to impose a Pigovian tax, t. Drag the line into an
appropriate place on the diagram to ensure a socially optimal level of production of the
good.
MC₂

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