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

question 125

Essay

Scenario 10-4
The demand curve for fire extinguishers slopes downward and the supply curve for fire extinguishers slopes upward. The production of the 500^th 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?

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Definitions:

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A particular or distinct undertaking, usually with defined goals and timelines, embarked on to achieve preset objectives.

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The entitlement of individuals to participate in the election of government officials and in decision-making processes through the act of voting.