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Consider a market where total private benefits are equal toTB= 30QQ2.Total private costs areTC= 10Q+ 0.25Q2.Total external dam-2ages (costs) are equal toTED= 0.75Q.For illustration, assume
Consider a market where total private benefits are equal toTB= 30QQ2.Total private costs areTC= 10Q+ 0.25Q2.Total external dam-2ages (costs) are equal toTED= 0.75Q.For illustration, assume theexternality is on the production side and increases total social cost12. What is the efficient tax rate (the Pigouvian prescription)? (2 points, nowork required) 13. Calculate the total externality (total external damages) at the efficientquantity. (2 points, no work required)
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