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What is the socially optimal level of water skiing

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Reference no: EM131919239

Problem

Figure 18P-6 shows the daily market for waterskiing permits on El Dorado Lake. Suppose each skier (each permit) causes $4 of damage to the lake.

a. Calculate the loss of surplus if there is no government intervention in this market.

b. Suppose the government imposes a $12 tax on suppliers of ski permits. Compared to no intervention, what is the net surplus gain or loss from this tax?

c. What is the socially optimal level of water skiing?

1513_Figure 18P-6.jpg

Reference no: EM131919239

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