Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

A per-unit subsidy can correct a positive externality Consumption of a good creates a positive externality. Marginal costs are 0.5q + 60, marginal benefits are

A per-unit subsidy can correct a positive externality

Consumption of a good creates a positive externality. Marginal costs are 0.5q + 60, marginal benefits are 110 - 1.5q and marginal social benefits are 110 - 0.5q. Provide a diagram showing the cooperative solution and the private solution. Illustrate and quantify how a per-unit subsidy can be used to correct this externality. Shade in the area representing the total cost to the government providing this subsidy. The subsidy required to correct this externality is equal to ________ dollars per unit.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

The Worldly Philosophers The Lives, Times And Ideas Of The Great Economic Thinkers

Authors: Robert L Heilbroner

7th Edition

068486214X, 9780684862149

More Books

Students also viewed these Economics questions

Question

=+what you can edit out yet still get the message across.

Answered: 1 week ago

Question

=+3. How could you extend the campaign creatively?

Answered: 1 week ago