The fumes from dry cleaners can contribute to air pollution. Suppose the following graph illustrates the situation

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The fumes from dry cleaners can contribute to air pollution. Suppose the following graph illustrates the situation in the dry cleaning market.

Price (dollars per item cleaned) S2 = marginal social cost S, = margina private cost $7.50 7.25 7.15 Quantity (items cle

a. Explain how a government can use a tax on dry cleaning to bring about the efficient level of production. What should the value of the tax be?
b. How large is the deadweight loss (in dollars) from excessive dry cleaning, according to the figure?

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Microeconomics

ISBN: 9780135952955

8th Edition

Authors: Glenn Hubbard, Anthony Patrick O Brien

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Question Posted: Nov 01, 2017 06:51 AM

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The fumes from dry cleaners can contribute to air pollution. Suppose the following graph illustrates the situation

Question:

Price (dollars per item cleaned) S2 = marginal social cost S, = margina private cost $7.50 7.25 7.15 Quantity (items cleaned per week) 600,000 750,000

Step by Step Answer:

a The tax should be the amount necessary to shift the supply curve from S 1 to S 2 That amoun...View the full answer

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