Microeconomics (7th Edition)
Microeconomics (7th Edition)
7th Edition
ISBN: 9780134737508
Author: R. Glenn Hubbard, Anthony Patrick O'Brien
Publisher: PEARSON
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Chapter 5, Problem 5.4.4PA
To determine

Whether merry-go-round is a public good or not.

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Carbon tax debate heats up in Montpelier VT Vermonters are debating the pros and cons of a state carbon tax-a new tax on gasoline, heating oil, and other fossil fuels sold in the state. Backers say the tax revenue would be used to cut other taxes and increase energy efficiency. Source: Watchdog.org, December 3, 2015 Draw a graph of the market for gasoline in Vermont to show the "pro" and the "con" for a state carbon tax. The graph shows the market for gasoline in Vermont when there is no carbon tax on gasoline. Draw a point that shows the market equilibrium. Label it 1 Transport that uses gasoline creates emissions pollution, and the quantity of emissions increases as the amount of gasoline used increases. Draw the marginal social cost curve and label the curve. Draw a point at the efficient market outcome. Label it 2. Now suppose the government places a carbon tax on gasoline equal to the marginal external cost at the efficient quantity of transport. Draw an arrow at the efficient…
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