Suppose a Firm Producing Roof Shingles Imposes a Negative Externality

question 60

Multiple Choice

Suppose a firm producing roof shingles imposes a negative externality on the surrounding area due to the noxious fumes emitted from the plant.The private marginal cost,social marginal cost and marginal benefit associated with the production of the shingles are given by the following equations: MCp = 5 + 2Q MCs = 10 + 3Q MB = 50 - Q
What level of emissions tax (dollars per unit of output produced) would provide this firm with the incentive to
Produce at the allocatively efficient level of output?

• A)$15
• B)$25
• C)$10
• D)$40
• E)$30