What is the socially optimal price to the consumer

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A study finds that leaf blowers make too much noise, so the government imposes a $10 tax on the sale of every unit to correct for the social cost of the noise pollution. The tax completely internalizes the externality. Before the corrective tax, Blown Away Manufacturing regularly sold blowers for $100. After the tax is in place, the consumer price for leaf blowers rises to $105.

a. Describe the impact of the tax on the number of leaf blowers sold.

b. What is the socially optimal price to the consumer?

c. What is the private market price?

d. What net price is Blown Away receiving after it pays the tax?

Reference no: EM13838663

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