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Suppose the production of this good results in harmful air pollution. To reduce the amount of output and pollution, the government decides to impose a
Suppose the production of this good results in harmful air pollution. To reduce the amount of output and pollution, the government decides to impose a per-unit tax of ?? dollars on each unit of the good produced. If the government wants to cut the equilibrium quantity of the good produced in half (i.e. 50% below the equilibrium level you solved for in part (A) above), what per-unit tax (??) should they use? (4 points)
For parts (A) and [B] below, assume the aggregate supply for a good is given bv: 0509) = 213 2 where p represents the price {in dollars], and assume the aggregate demand for the good is given by: (2%)) = 13 - in A) Solve for the equilibrium quantity [0'] that would be produced and consumed if the government does not intervene {i.e. does not impose a tax] in the market. [3 points] B] Suppose the production of this good results in harmful air pollution. To reduce the amount of output and pollution, the government decides to impose a perunit tax oft dollars on each unit of the good produced. If the government wants to cut the equilibrium quantity of the good produced in half (Le. 50% below the equilibrium level you solved for in part {A} above), what per-unit tax {1'} should they use? {4 points]Step by Step Solution
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