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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
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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 $8-per-bag tax on sellers. What is the new equilibrium price

User Mark Homer
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Answer:

If negative externalities pop up in a market, the equilibrium is higher than the efficient output.

Thus when it comes to the government rectification regarding the side effects of that commercial , activity, if the amount of bags is (1) then the new equilibrium would be: p*= $17

User Andrine
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