Pigouvian Taxes 3. A firm with C = IOQ + 0.5Ct2 creates social damages of D = 15Q + 0.5Q2. Demand is P = 100
Pigouvian Taxes 3. A firm with C = IOQ + 0.5Ct2 creates social damages of D = 15Q + 0.5Q2. Demand is P = 100 Q. a. Compute and compare output Q under the private {noncooperative} solution and optimal {cooperative} solution. b. Calculate and illustrate the efficiency loss. Find C5 = Benefits Expenditure and P5 = Revenue Cost. c. Show how a perunit tax can be used to induce the cooperative solution
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