Consider a Monopolist with a Private MC of $20 Per

question 2

Multiple Choice

Consider a monopolist with a private MC of $20 per unit who faces a demand curve of P = 100 - q.There is also a negative consumption externality in the market of $40 per unit.What is the most appropriate policy response if the government wishes to maximize surplus in the market.

• A)The government should implement a Pigovian tax of $40 on consumers.
• B)The government should implement a Pigovian tax of $40 levied on the monopolist.
• C)The government should subsidize production by $40 per unit.
• D)Either a or B

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Definitions:

Sensible Location

A location or placement chosen based on logical reasoning, considering factors such as convenience, cost-efficiency, and accessibility.

Supply-Chain Management

The management of the flow of goods and services, involving the movement and storage of raw materials, work-in-process inventory, and finished goods from point of origin to point of consumption.

Resources View

A method managers use to evaluate the resources at their disposal and manage or alter them to achieve competitive advantage.

Technological

Pertaining to technology, involving the application of scientific knowledge for practical purposes, especially in industry.