Narrbegin Exhibit 10.2 Carbon emissions as an externality
-Assume that the private supply is 'Supply 1' and the supply including carbon tax is 'Supply 2' (Exhibit 10.2). What is the level of carbon tax imposed?

Question

Narrbegin Exhibit 10.2 Carbon emissions as an externality  
-Assume that the private supply is 'Supply 1' and the supply including carbon tax is 'Supply 2' (Exhibit 10.2). What is the level of carbon tax imposed?

Quizplus · Accepted Answer

The level of carbon tax can be calculated by the vertical distance between Supply 1 and Supply 2 at the quantity demanded of 60. This distance is $30, so the level of carbon tax imposed is $30 per unit of output.