suppose the market for dry cleaning has an inverse demand of P = 10 â€" 0.15Q and an inverse supply curve (MC) of P = 0.05Q, where P is the price per article of clothing and Q is the quantity of clothing laundered. Suppose the external marginal cost of dry cleaning is $1. If the government tries to correct the negative externality by placing a $1 tax on each laundered piece of clothing, buyers will pay and sellers will receive , net of the tax.

The correct solution will be "$3.25; $2.25". The further explanation is given below.

Explanation:

The $1 tax could very well start creating a wedge between some of the price that producers and consumers start receiving.

⇒

to

⇒

Attempting to solve the Q, we should get Q=45 equilibrium.

The market value that customers pay will be:

=

= ($)

The cost that customers receive will be:

=

= ($)

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answer(b); ; ; the quantitative or qualitative variable for which the experimenter wishes to determine how its value is affected by the explanatory variable;