5Lecture

5Lecture - Examples of consumption externalities: cigarette...

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Lecture 5 Externalities II 14:48 Consumption Tax Impose a sales tax equal to the MEX at the socially optimal output Q*. Call it T*. Tax reduces marginal benefit from consumption, so consumers demand less. Tax yields  a net marginal benefit curver (NMB).
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Unformatted text preview: Examples of consumption externalities: cigarette smoke, gasoline emissions. Standards and Quotas A command and control approach (as distinct from economic approach) Government restricts output to socially optima level 14:48 14:48...
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5Lecture - Examples of consumption externalities: cigarette...

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