Suppose that for some abatement equipment market, the MSB = 525 - 1.2Q and MPB = 325 - 0.8Q, then the Pigouvian subsidy for that market must equal 200 - 0.4Q at Q_E to achieve an efficient outcome.

Question

Quizplus · Accepted Answer

The Pigouvian subsidy is calculated as the difference between the Marginal Social Benefit (MSB) and the Marginal Private Benefit (MPB), which in this case is (525 - 1.2Q) - (325 - 0.8Q) = 200 - 0.4Q, aligning with the statement provided.

Suppose That for Some Abatement Equipment Market, the MSB =