Question

Can you please explain the solution and theory/reasoning behind your answer because I would like to learn how to solve this problem. Thank you so much!

I need help with question 40 but it requires the completion of questions 38 and 39 :(

38. Suppose that demand for motivational posters is given by Qd = 400 - 10P and supply is given by Qs = 100+ 5P. Additionally, because motivational posters are a horrifying torture devised by middle-managers, they impose a $3 negative externality per unit. What are the equilibrium price and quantity of motivational posters in the private equilibrium? A. 20 posters at $200 each. B. 190 posters at $21 each. C. 200 posters at $20 each. D. 210 posters at $19 each. 39. Refer back to the market in the previous question. What are the equilibrium price and quantity in the social equilibrium? A. 20 posters at $200 each. B. 190 posters at $21 each. C. 200 posters at $20 each. D. 210 posters at $19 each. 40. What kind of Pigouvian tax or subsidy would be successful in internalizing the externality from the previous two questions? A. A $1 Pigouvian tax B. A $1 Pigouvian subsidy C. A $3 Pigouvian tax D. A $3 Pigouvian subsidy

Answer 1

Solution 38. Suppose that demand for motivational postois is given by Qd = 400 - top and supply is given by as = 100 +5p. Additionally, because motivational poster are a horrifying torture derived by middle managers, they impose a $3 negative externality ber unit. What are the equilibrium price and quantity of motivational posters in the private equilibrium ? Hence option to "260 Posters at $ 19 each" is correct answer. 39. Refer back to the market in the previous question. What are the equilibrium price and quantity in the social equilibrium. Hence option Co" cc 200 posters at $ 20 each I is correct answer. 6. What kind of Pigouvion tax or subsidy would be successful in intenalizing the externality from the previous the questions. Hence option 'B' CAL & Pigouvion subsidy. is cogerect answer.