Table 10-1

$$\begin{array} { | c | c | c | c | }
\hline \begin{array} { c }
\text { Quantity } \
\text { (Units) }
\end{array} & \begin{array} { c }
\text { Private Value } \
\text { (Dollars) }
\end{array} & \begin{array} { c }
\text { Private Cost } \
\text { (Dollars) }
\end{array} & \begin{array} { c }
\text { External Cost } \
\text { (Dollars) }
\end{array} \
\hline 1 & 28 & 12 & 4 \
\hline 2 & 26 & 14 & 4 \
\hline 3 & 24 & 16 & 4 \
\hline 4 & 22 & 18 & 4 \
\hline 5 & 20 & 20 & 4 \
\hline 6 & 18 & 22 & 4 \
\hline 7 & 16 & 24 & 4 \
\hline
\end{array}$$
-Refer to Table 10-1. How large would a corrective tax need to be to move this market from the equilibrium outcome to the socially optimal outcome?
A)$4
B)$5
C)$24
D)$20

Question

Table 10-1
​
 $$\begin{array} { | c | c | c | c | } 
\hline \begin{array} { c } 
\text { Quantity } \
\text { (Units) }
\end{array} & \begin{array} { c } 
\text { Private Value } \
\text { (Dollars) }
\end{array} & \begin{array} { c } 
\text { Private Cost } \
\text { (Dollars) }
\end{array} & \begin{array} { c } 
\text { External Cost } \
\text { (Dollars) }
\end{array} \
\hline 1 & 28 & 12 & 4 \
\hline 2 & 26 & 14 & 4 \
\hline 3 & 24 & 16 & 4 \
\hline 4 & 22 & 18 & 4 \
\hline 5 & 20 & 20 & 4 \
\hline 6 & 18 & 22 & 4 \
\hline 7 & 16 & 24 & 4 \
\hline
\end{array}$$
-Refer to Table 10-1. How large would a corrective tax need to be to move this market from the equilibrium outcome to the socially optimal outcome?
A)$4
B)$5
C)$24
D)$20

Quizplus · Accepted Answer

The corrective tax needed to move the market to the socially optimal outcome is equal to the external cost, which is $4. This tax internalizes the external cost, aligning private costs with social costs.

Table 10-1 ​ -Refer to Table 10-1

Table 10-1
-Refer to Table 10-1