Question
The Market of Gasoline in the Sate of Maryland is described by the figure below:The market equilibrium without market intervention is 100 million of gallons
The Market of Gasoline in the Sate of Maryland is described by the figure below:The market equilibrium without market intervention is 100 million of gallons per year at $5 per gallon. The government estimates that the cost of the externality per gallon of gasoline consumed is $1.If the Government wants to induce all economic units to achieve the efficient allocation (where the social net benefit is maximized), then it should impose a piguvian tax in the amount of $______ so the gas stations sell _______ millions of gallons, and the social net benefit will reach its maximum at a total value of $__________.
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