Consider the market for masks. Not everyone values the mask equally: marginal private benefit is 100 Q and marginal private costs are given by 20 (per Q). Given that wearing masks will help reduce spread of virus, marginal benefit to others is MBO = 50 (per Q).

Government solution: Suppose the government steps in and decides to correct the externality by subsidizing masks.

e. Suggest a Pigouvian tax that would induce efficient consumption. What is the optimal tax rate per unit, and how much subsidy is needed? [5 points]