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The efficient market (socially desirable) equilibrium levels of price and output. What action might the government take in each case to ensure that the efficient level of output is restored?a) An industry emits carbon gas into the atmosphere.
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Question 1 Using figure 10.1, p.199 of your prescribed text as a starting point, explain the impact of the following events on the efficient market (socially desirable) equilibrium levels of price and output. What action might the government take in each case to ensure that the efficient level of output is restored? a) An industry emits carbon gas into the atmosphere. As shown in the figure, at the normal market price (Pp) when the supply and demand for the product is balanced or at equilibrium (Ep), the quantity produced or consumed is at the level of Qmarket. Thus, Qmarket quantity maximises the total value to buyers minus the total private costs to the industry. But when the industry emits carbon gas in to the atmosphere, it causes air pollution for the people who breathe the air, thus producing a negative externality. An externality is the impact of one person's actions on...
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