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Question 1

Suppose that there is a negative externality in the market for burritos. The graph below shows the supply and demand curves for burritos.

What is the market equilibrium quantity?

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Question 2

What is the market price?

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Question 3

What is the optimal (efficient) quantity?

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Question 4

What should the government do in order to ensure the market produces the optimal (efficient) quantity?

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Question 5

How big should the government's corrective taxes or subsidies be in this case?

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Question 6

As a result of this negative externality, the market

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