In order to reach the social optimum, the government could

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To reach the social optimum in a market with a negative externality, government intervention often involves a tax (Pigouvian tax) equal to the marginal external cost at the socially optimal output, so that the private cost plus tax equals the social cost.
Option 1: impose a tax of $8 per unit on plastics. This choice aligns the private marginal cost with the social marginal cost at the socially optimal quantity, internalizing the external cost and moving the market toward the efficient outcome.
Option 2: impose a tax of $6 per unit on plastics. While a tax is better than no intervention, a $6 tax would likely be smaller than the required Pigouvian tax, causing less internalization of the external cost and thus a market outcome away from the social optimum.
Option 3: offer a subsidy of $6 per unit on plastics. Subsidies for a negative externality worsen the market failure by encouraging more production and consumption of the good with the external cost, pulling the outcome further from the social optimum.
Option 4: impose a tax of $2 per unit on plastics. This tax is even smaller and would provide even less incentive to reduce production to the socially optimal level, leaving the market farther from the efficient outcome.
Overall, only the $8 per unit tax directly addresses the external cost at the optimum, while the other policies either undercharge internalization, subsidize the harmful activity, or under-tax relative to the required level.

ECON1-TTh Chapter 10 Assignment

In order to reach the social optimum, the government could

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ECON1-TTh Chapter 10 Assignment

In order to reach the social optimum, the government could

查看解析

登录即可查看完整答案

类似问题

Question54 Who wins from implementing an output tax on a good with negative environmental externality? Producers Government Consumers All of the other options ResetMaximum marks: 1 Flag question undefined

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