What is the market equilibrium? What is the market price? What is the optimal quantity? What should the government do in order to ensure the market produces optimal quantity? How big should the government's corrective taxes or subsidies be in this case? As a result of this negative externality the market over produces, produces optimal amount, or under produces?

Page 3 Suppose that there is a negative externality in the market for pizza rolls. The graph below shows the supply and demand curves for pizza rolls. 14+ 13 12 11- 10% Price of pizza rolls MPC) N Quantity of pisa moll,$ 9 10 11 12 13 14 10. What is the market equilibrium? 11. What is the market price? 12. What is the optimal (efficient) quantity? 13. What should the government do in order to ensure the market produces optimal (efficient) quantity? a. Impose corrective taxes (Pigovian taxes) Do nothing hp 16 9 if8 1 + 144 f11 DDI % & 4 5 8 9 R T Y U O P F G H C K L