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(Solved): The figure to the right represents the market for jeans. Producing jeans causes pollution that cr ...




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The figure to the right represents the market for jeans. Producing jeans causes pollution that creates of medical costs for people living in the area. The market equilibrium price is , and the quantity is pairs of jeans. The socially optimal quantity is pạirs. Suppose the government intervenes in the market to reduce pollution by introducing a corrective tax. If the government succeeded in reducing the quantity to the socially optimal level, consumers and producers would collectively pay tax for each pair of jeans.


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