For an industry with MAC = 540 - 2E and MDC = 8E,the socially efficient tax is equal to ________.
A)$54
B)$90
C)$432
D)$720

Question

Quizplus · Accepted Answer

To find the socially efficient tax, we need to set MAC equal to MDC and solve for E.
540 - 2E = 8E
540 = 10E
E = 54
To find the socially efficient tax, we substitute E = 54 into either MAC or MDC and multiply by the tax rate.
The socially efficient tax = tax rate × MAC(E = 54)
= tax rate × (540 - 2(54))
= tax rate × 432
Therefore, to find the socially efficient tax, we need to know the tax rate. None of the answer choices provide this information.

For an Industry with MAC = 540 - 2E and MDC