Suppose that demand for anchovy pizza is given by PD = 50 – Q", and the supply of anchovy pizza is given by PS = Q$. Anchovy pizza smells bad. The bad smell imposes an external cost on anyone near the pizza equal to $5 per pizza. If the government wanted to correct the externality in the market for anchovy pizza and induce it to produce the socially efficient quantity of pizza, which policy should it adopt? Subsidy of $10 Tax of $5 Subsidy of $5 O Tax of $10

Suppose that demand for anchovy pizza is given by PD = 50 – Q", and the supply of anchovy pizza is given by PS = Q$. Anchovy pizza smells bad. The bad smell imposes an external cost on anyone near the pizza equal to $5 per pizza. If the government wanted to correct the externality in the market for anchovy pizza and induce it to produce the socially efficient quantity of pizza, which policy should it adopt? Subsidy of $10 Tax of $5 Subsidy of $5 O Tax of $10

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

7th Edition

ISBN:9781285165875

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter22: Frontiers Of Microeconomics

Section: Chapter Questions

Problem 8PA

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