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Scenario 10-4 the Demand Curve for Fire Extinguishers Slopes Downward and the and the Supply

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Scenario 10-4
The demand curve for fire extinguishers slopes downward and the supply curve for fire extinguishers slopes upward. The production of the 500th fire extinguisher entails the following:
• a private cost of $10;
• an external cost of $0;
• a private value of $9;
• an external benefit of $3.
-Refer to Scenario 10-4. In order to reach the social optimum, should fire extinguishers be taxed or subsidized? What is the appropriate amount of the tax or subsidy on each fire extinguisher?


Definitions:

Property Rights

The legal rights to possess, use, and dispose of assets or property, which can be protected and enforced by law.

Open Ocean

The vast expanses of sea located beyond the continental shelf, characterized by deep waters and minimal human activity.

United Nations

An international organization founded in 1945 to promote peace, security, and cooperation among countries.

ITQs

Individual Transferable Quotas; a tool used in environmental management and fisheries, setting a total allowable catch to help prevent overfishing.

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