Market supply in a competitive industry is p= Q
Question # 00595594
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Updated on: 09/27/2017 05:25 AM Due on: 09/27/2017
Market supply in a competitive industry is p= Q. Demand is p= 100 ? Q. Production creates pollution with a social cost of $1 per unit of output. In response to environmentalists, the government creates a tax of $2 per unit.
a. Is overall welfare improved or reduced by the tax?
b. Would social welfare in the industry be larger or smaller if it were monopolized and the tax were dropped? Explain
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Solution: Market supply in a competitive industry is p= Q