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The private marginal benefit of a product's consumption is PMB = 200 - 2Q, and the private marginal cost of its production is PMC = 2Q. The marginal external damage of this good's production is MD = 4Q. The government imposes a tax on each unit sold in an effort to internalize the externality. How high should the tax be set in order to achieve the social optimum?

Respuesta :

Answer:

In order to achieve social optimum 100 tax should be set.

Explanation:

At socially efficient equilibrium, PMB = PMC + MD

200-2Q = 2Q + 4Q

200 = 8Q

Q= 25

Tax = MD = 4*25= 100

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