- Price Costs R P Tax T C D Msc Mc Output State The Type Of Tax And What Does It Represent 2 Marks If The Externality 1 (66.63 KiB) Viewed 15 times
Price, Costs R P Tax=t C D MSC MC Output State the type of tax and what does it represent. [2 marks] If the externality producing firm were to cut its output from q* to q', which region in the diagram above will represent its loss in profits? [1 mark] If the externality producing firm were to cut its output from q* to q', which region in the diagram above will represent the cost reduction to the affected firm? [1 mark] Suppose the externality producing firm has ownership rights, using your answers from parts ii) and iii) above, state how a fee could be priced by the affected firm to pay the externality producing firm to reduce their output to q'. [1 mark]