This Tes a. strates the situaton in dry deaning market Explain how a government

Question

This Tes a. strates the situaton in dry deaning market Explain how a government can use a tax on dry cleaning to bring about the efficient level of production can use a tax to decreace the manginal prvate cost of producing dy cleaning to equal he manginal can use a tax to increase the marginal private benett of consuming dry cleaning to equal the marginal an use a tax to decrease the marginal private benett of cond aning dy cleaning to equal the marginal can use a tax to increase the marginal pnvate cost of producing dry dleaning to equal the marginal OB. The social cost C.The O D. The govermement c social cost laxsta ad be S-DHunt (Enter your response rounded to hwo doona" places) Qanity(ms cleaned per week in 1000s) How urge is he dead eight loss in dolars) torn excessive dy dearing, according to the fgu e? The dudweight loss is sü thousand (Enter your response as an indeger )

Explanation / Answer

Answer
Option E
Per unit, tax should be used to increase private cost to social optimum cost so that the production will be equal to social optimum
social equilibrium is at Q=500 and the price willing to pay by buyer=9 and supplier accept is $5
The tax=9-5=$4 per unit
DWL=0.5*tax*change in quantity
=0.5*4*(700-500)
=$400

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Option E, $4, $400

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