Use the figure below to answer the following questions. Figure 15.2.1
-Refer to Figure 15.2.1.The figure shows the marginal private cost curve,the marginal social cost curve and the market demand curve of a mining firm.If a constant per unit tax is imposed that generates an efficient allocation of resources,then consumers pay a per unit price of

Question

Use the figure below to answer the following questions.

Figure 15.2.1
-Refer to Figure 15.2.1.The figure shows the marginal private cost curve,the marginal social cost curve and the market demand curve of a mining firm.If a constant per unit tax is imposed that generates an efficient allocation of resources,then consumers pay a per unit price of

Quizplus · Accepted Answer

In an efficient allocation of resources, the per unit tax should be equal to the difference between marginal social cost (MSC) and marginal private cost (MPC) at the efficient level of output. In this case, the efficient level of output is where the MSC curve intersects the market demand curve, which is at point A (S1U1B13). At this point, the MPC is at point B (S1U1B0). Therefore, the per unit tax should be equal to S1U1B13 - S1U1B0, which is PS1U1B13S1U1B0.

The per unit price paid by consumers after the tax is the sum of the per unit price paid to the firm (which is equal to the MPC plus the per unit tax) and the per unit tax. At the efficient level of output, the firm will produce where the MPC plus the per unit tax equals the per unit price paid by consumers. This occurs at point C (S1U1B11). Therefore, consumers will pay a per unit price of PS1U1B13S1U1B0 + PS1U1B11S1U1B0, which simplifies to PS1U1B13S1U1B0.

Use the Figure Below to Answer the Following Questions