In Market X, the external benefit of consumption is $5. InMarket Y, the external cost of consumption is $10. Efficiencyin both markets could be achieved by:

Question

Quizplus · Accepted Answer

Taxing Market Y and subsidizing Market X would lead to the internalization of the external cost in Market Y and external benefit in Market X, leading to efficiency in both markets. Subsidizing both markets or taxing both markets would not achieve efficiency as it would either perpetuate the external cost or reduce the external benefit.

In Market X, the External Benefit of Consumption Is $5