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The figure to the right represents the market for jeans. Producing jeans causes pollution that cr ...
The figure to the right represents the market for jeans. Producing jeans causes pollution that creates $20 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.