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Effects of the intervention be for the government budget

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Assume that the marginal cost curve for honey producers is given by p=q. The demand for honey is given by p=20-q. The production of honey also affects the neighboring apple producers positively but the honey producers do not incorporate this in the production decisions. This externality is equal to eq per produced unit. Show in a figure and derive the welfare loss that occurs. What can the government do to solve the problem? Show in the figure and explain. What would the effects of the intervention be for the government budget?

Reference no: EM132474001

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