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Economics (MindTap Course List)

13th Edition
Roger A. Arnold
ISBN: 9781337617383

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BuyFindarrow_forward

Economics (MindTap Course List)

13th Edition
Roger A. Arnold
ISBN: 9781337617383
Textbook Problem

What condition must be satisfied for a tax to adjust correctly for a negative externality?

To determine

The condition that must be stratified for adjusting the tax to negative externality.

Explanation

When a cost is imposed on the third party who is not directly involved in an economic transaction is called negative externality or negative externality that creates marginal social cost. The marginal social cost is the sum of marginal private cost and marginal external cost (MSC=MPC+MEC)

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