Suppose that the market for steel is shown in the above figure. What specific tax would result in a competitive market producing the socially optimal quantity of steel?
What will be an ideal response?
The social optimum occurs when 50 ingots are produced. At this level, the marginal external cost is $50. Thus, a specific tax of $50 will yield the socially optimal quantity.
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Investment decreases by $300 billion, government expenditure is unchanged, and exports increase by $500 billion. As a result, autonomous expenditure ________, the total expenditure ________, and equilibrium real GDP ________
A) increases by $800 billion; increases; increases by more than $800 billion B) increases by $200 billion; increases; increases by more than $200 billion C) decreases by $300 billion; decreases; decreases by more than $300 billion D) is unchanged; is unchanged; is unchanged E) increases by $500 billion; is unchanged; increases by more than $500 billion
If the marginal propensity to consume = 0.75, then:
a. the marginal propensity to save = 0.75. b. the marginal propensity to save = 1.33. c. the marginal propensity to save = 0.20. d. the marginal propensity to save = 0.25. e. since the marginal propensity to save and the marginal propensity to consume are unrelated, we cannot determine the marginal propensity to save from the information given.