social optimum
What tax per unit of good X would achieve the social optimum? $______
a. This tax will shift the S curve (up, down), so the price of X will (increase, decrease) and the quantity of X will (increase, decrease).
b. Give the letters of the area that shows the environmental benefit: _______ (Hint: You’ll need a new letter H); the environmental benefit is $_______.
c. Give the letters of the area that shows the loss to society (ignoring the environmental gain) from the (increase, decrease) in the quantity of X: ______; the loss is $_______.
d. Give the letters of the area that shows the net gain to society (the environmental benefit minus the loss to society from less X): _______; the net gain is $_______.
social optimum