Posted by Anil on .
See question below at ****
Suppose local govt decides that a tax is the best way to address the inefficiency created by outdoor concerts. Assuming the social cost curve and the private cost curve are parallel to each other, how much does the tax on concerts have to be to achieve the socially optimal outcome?
Econ - urgent please help - bobpursley, Monday, November 14, 2011 at 8:43am
If one adds a tax ,then the private cost curve moves upward to the social cost curve, but will not cross it ever, it could be colinear. There would not be an optimals solution of attendance, as the marginal revenue would always equal mariginal costs.
So the tax to get to this is the difference between the private cost curve and the social cost curve AT ANY POINT, as it is constant.
***** How much of the tax is borne by consumers of the concerts? How do I figure this? Thank you.