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29 Sep 2019
Suppose that the Private Cost of producing a good is given by the equation Q = 3P - 5, but the Social Cost of producing the good is given by Q = 3P - 11. Meanwhile, the demand for this good is given by Q = 111 - 2P. In order to correct for the externality, the government has imposed a tax of $12.89 per unit on producers, but the government did so without bothering to check whether or not the tax was equal to the size of the externality. Given all of this information, what is the area of deadweight loss in this market after the tax has been imposed?
Suppose that the Private Cost of producing a good is given by the equation Q = 3P - 5, but the Social Cost of producing the good is given by Q = 3P - 11. Meanwhile, the demand for this good is given by Q = 111 - 2P. In order to correct for the externality, the government has imposed a tax of $12.89 per unit on producers, but the government did so without bothering to check whether or not the tax was equal to the size of the externality. Given all of this information, what is the area of deadweight loss in this market after the tax has been imposed?
Anne Gillian DueroLv10
29 Sep 2019
