Estimate the impact of given on the tax

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Reference no: EM132200105

Question: Consider the Pigovian Tax imposed on an industry as in Q3 of Homework 5 (question 3 from homework 5 says several identical firms in an economy with the market supply curve given by P=10+0.4Q. The firm is in a competitive market. The demand is given by P=100-0.4Q. The firms in the market also produce pollutants deriving a cost to the society SC = (0.1)Q) Estimate the impact of the following on the tax assuming that the population is 100.

(a) A study proposes that the environmental damage is half the impact of previous estimate. Therefore social cost is only 0.05Q for 100 people.

(b) Due to lower property prices the population affected by the industry doubles.

(Consider impact on both demand and social cost in b. and c.)

Reference no: EM132200105

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