23 of 100 An advantage of the Pigouvian tax is that it causes firms to increase supply and reduce pollution does not require firms to find an efficient level of output makes the firms treat the tax similar to other costs; they then decrease supply, and thus decrease pollution creates an incentive for firms to avoid reducing pollution

23 of 100 An advantage of the Pigouvian tax is that it causes firms to increase supply and reduce pollution does not require firms to find an efficient level of output makes the firms treat the tax similar to other costs; they then decrease supply, and thus decrease pollution creates an incentive for firms to avoid reducing pollution

Principles of Economics, 7th Edition (MindTap Course List)

7th Edition

ISBN:9781285165875

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter10: Externalities

Section: Chapter Questions

Problem 5QCMC

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Similar questions

Show the market for cigarettes in equilibrium, assuming that there are no laws banning smoking in public. Label the equilibrium private market price and quantity as Pm and Qm. Add whatever is needed to the model to show the impact of the negative externality from second-hand smoking. (Hint: In this case it is the consumers, not the sellers, who are creating the negative externality.) Label the social optimal output and price as Fe and Qe. On the graph, shade in the deadweight loss at the market output.
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