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QUESTION

Assume excessively large SUVs include spillover costs that are not borne by the initial consumer but rather society as a whole. i)Use a supply and...

Assume excessively large SUVs include spillover costs that are not borne by the initial consumer but rather society as a whole.

i)Use a supply and demand graph to illustrate a negative externality. Identify the current price and output and the socially optimal price and output.

ii) Explain what the government must do to fix this negative externality. Draw a NEW GRAPH.

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