Draw a market with negative production externality

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Reference no: EM13978068

Draw a market with a negative production externality.

a) Show the unregulated market equilibrium

b) Use an incentive based policy to bring the economy to an optimal equilibrium

c) What kind of instrument (policy) do you use?

d) What's its magnitude?

e) What does the policy lead agents on both sides of the market to do?

Reference no: EM13978068

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