5. Using a well-labeled diagram, show how inefficiency can be corrected in a perfectly competitive market via: i) a tax on a good that has a negative external cost; ii) a subsidy for a good with a positive external benefit. Price Quantity Price Quantity

5. Using a well-labeled diagram, show how inefficiency can be corrected in a perfectly competitive market via: i) a tax on a good that has a negative external cost; ii) a subsidy for a good with a positive external benefit. Price Quantity Price Quantity

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

5. Using a well-labeled diagram, show how inefficiency can be corrected in a perfectly
competitive market via: i) a tax on a good that has a negative external cost; ii) a subsidy
for a good with a positive external benefit.
Price
Quantity
Price
Quantity

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2
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