If there were no externalities the welfare maximizing quantity would be [Select (1)], while [Select (2)] would reflect the true benefit and cost to society. However, this model describes the presence of a [Select (3)] externality in [Select (4)]. Therefore, the welfare-maximizing quantity is [Select (5)] and the deadweight loss is [Select (6)]. If the externality was fully internalized through a corrective tax equal to [Select (7)], then the new market price would be [Select (8)], the new market quantity would be [Select (9)] and society's welfare would be [Select (10)] without the corrective tax.
In this plot we model some of the Australian markets targeted by the Safeguard Mechanism (e.g. fossil fuels). On the horizontal axis we have the quantity, and on the vertical axis its price.
If there were no externalities the welfare maximizing quantity would be [Select (1)], while [Select (2)] would reflect the true benefit and cost to society. However, this model describes the presence of a [Select (3)] externality in [Select (4)]. Therefore, the welfare-maximizing quantity is [Select (5)] and the
(1) a) Qa b) Qb c) Qc d) none of the above
(2) a) Pa b) Pb c) Pc d) none of the above
(3) a) positive b) negative c) Neither a positive nor negative
(4) a)consumption b) production
(5) a) Qa b) Qb c) Qc d) none of the above
(6) a) zero b) the orange area c) the green area d) the blue area e) none of the above
(7) a) Pa-Pb b) Pb-Pc c) Pa-Pc d) None of the above
(8) a) Pa b) Pb c) Pc d) none of the above
(9) a) Qa b) Qb c) Qc d) none of the above
(10) a) lower than b) the same as c) higher than
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