Assume that we are back to talking about bags of oranges (a private good), but that the government has decided that tossed orange peels impose a negative externality on the public that must be rectified by imposing a $8-per-bag tax on sellers. What is the new equilibrium price

Question

Maggie Frye

Business

4 September, 16:19

Assume that we are back to talking about bags of oranges (a private good), but that the government has decided that tossed orange peels impose a negative externality on the public that must be rectified by imposing a $8-per-bag tax on sellers. What is the new equilibrium price

+4

Answers (1)

Know the Answer?

Isiah Sweeney · Answer 1

If negative externalities pop up in a market, the equilibrium is higher than the efficient output.

Thus when it comes to the government rectification regarding the side effects of that commercial, activity, if the amount of bags is (1) then the new equilibrium would be: p * = $17