Assume a positively sloped, short-run supply curve in Figure 19.3 and a constant $5 per unit marginal
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Assume a positively sloped, short-run supply curve in Figure 19.3 and a constant $5 per unit marginal external benefi t. Show what happens with a $5 subsidy given to producers.
Who gains the benefi ts of this policy?
Transcribed Image Text:
P P 5 P 5 0 MSB MPB + MEB C A B S = MPC D Q Q2 S* = S-5 D = MPB MEB Figure 19.3 Using Commodity Subsidies to Correct for Positive Externalities
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The figure youve provided illustrates a market where there is a positive externality associated with consumption or production The Marginal Social Ben...View the full answer
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Related Book For
The Economics Of Health And Health Care
ISBN: 9781138208049
8th Edition
Authors: Sherman Folland, Allen C. Goodman, Miron Stano
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