C. assume that we are back to talking about bags of oranges (a private good), but that the government has decided that tossed orange peels impose a negative externality on the public that must be rectified by imposing a $4-per-bag tax on sellers. what is the new equilibrium price? p * = $. what is the new equilibrium quantity? q * = bag (s). if the new equilibrium quantity is the optimal quantity, by how many bags were oranges being overproduced before? q * = bag (s).

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Genevieve Andrade

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C. assume that we are back to talking about bags of oranges (a private good), but that the government has decided that tossed orange peels impose a negative externality on the public that must be rectified by imposing a $4-per-bag tax on sellers. what is the new equilibrium price? p * = $. what is the new equilibrium quantity? q * = bag (s). if the new equilibrium quantity is the optimal quantity, by how many bags were oranges being overproduced before? q * = bag (s).

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Olson · Answer 1

If the government has decided that tossed orange peels impose a negative on the public that must be rectified by imposing a $4 per bag, then the new equilibrium price is, p * = $9 (when the quantity of bag is 1) In that time the new equilibrium quantity is, q * = 5 bag (s). If the new equilibrium quantity (5) is the optimal quantity, before some bags were oranges being overproduced that is, q * = 1 bag (s)