What should government do in order to ensure market produces

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Problem

Suppose that there is a positive externality in the market for pizza rolls. The graph below shows the supply and demand curves for pizza rolls. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 1 2 3 4 5 6 7 8 9 10 11 12 13 14 Quantity of pizza rolls Price of pizza rolls D market S (MPC) Ds (MSB) What is the market equilibrium quantity? What is the market price? What is the optimal quantity? What should the government do in order to ensure the market produces the optimal (efficient) quantity? Do nothing. Impose corrective subsidies (Pigovian subsidies). Get the instant assignment help. Impose corrective taxes (Pigovian taxes) How big should the government's corrective taxes or subsidies be in this case?

Reference no: EM133917787

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