As an economic consultant to the federal government, you recommend a market-based national policy response to global warming. In particular, you suggest using a pollution charge, which can be implemented as a gasoline tax. Based on your estimates, the marginal benefits and costs per gallon of gasoline are modeled as follows:
MPB = 10 - 0.7Q MEB = - 0.05Q MSC = MPC = 1 + 0.15Q,
where Q is in millions of gallons.
-1.Algebraically solve for the efficient equilibrium price and quantity, P_E and Q_E.
2. Find the dollar value of a per unit gasoline tax that would achieve the efficient solution, and calculate the resulting tax revenues generated to government.

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The Answer of As an economic consultant to the federal government, you recommend a market-based national policy response to global warming. In particular, you suggest using a pollution charge, which can be implemented as a gasoline tax. Based on your estimates, the marginal benefits and costs per gallon of gasoline are modeled as follows: MPB = 10 - 0.7Q MEB = - 0.05Q MSC = MPC = 1 + 0.15Q, where Q is in millions of gallons. -1.Algebraically solve for the efficient equilibrium price and quantity, P_E and Q_E. 2. Find the dollar value of a per unit gasoline tax that would achieve the efficient solution, and calculate the resulting tax revenues generated to government.

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