Advantage to society to correct the externality

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Q1. Jane wants to buy a beautiful doll as a gift for her sister's birthday. She knows that the same product is offered in different shops with prices of $120, $100 and $80 with odds of 1/3 of each price. She just stopped at a shop and knows that the price is $100. Suppose that there is a search cost of $5 for each search. Should she search for one more time?

Q2. How did you arrive at the 2 dollars for taxes and what is the advantage to society to correct the externality?

Reference no: EM135682

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