PRICE OF GOOD X P3 P₂ P₁ 0 Q₁ Q₂ Q3 Marginal Social Cost Marginal Private Cost Marginal Social Benefit QUANTITY OF GOOD X To correct for the negative externality shown in the graph above, the government should: provide a subsidy in the amount of P3-P2 to firms that are producing Good "X" provide a subsidy in the amount of P4-P₂ to firms that are producing Good "X" implement a tax in the amount of P4-P2 to firms that are producing Good "X" implement a tax in the amount of P3-P2 to firms that are producing Good "X" do nothing as this market is already operating at the socially efficient level of output

PRICE OF GOOD X P3 P₂ P₁ 0 Q₁ Q₂ Q3 Marginal Social Cost Marginal Private Cost Marginal Social Benefit QUANTITY OF GOOD X To correct for the negative externality shown in the graph above, the government should: provide a subsidy in the amount of P3-P2 to firms that are producing Good "X" provide a subsidy in the amount of P4-P₂ to firms that are producing Good "X" implement a tax in the amount of P4-P2 to firms that are producing Good "X" implement a tax in the amount of P3-P2 to firms that are producing Good "X" do nothing as this market is already operating at the socially efficient level of output

Economics (MindTap Course List)

13th Edition

ISBN:9781337617383

Author:Roger A. Arnold

Publisher:Roger A. Arnold

Chapter30: Market Failure: Externalities, Public Goods, And Asymmetric Information

Section: Chapter Questions

Problem 1WNG

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