Business, 26.02.2020 02:22 Serenitybella

A careful study has determined that bus transit has an external benefit for society valued at $2 per bus ride as a result of the reductions in urban congestion and air emissions that result. Consider the current demand for and supply of bus transit, which in this locale is provided by a number of firms in a competitive marketplace and which currently do not account for the $2 per-ride external benefit.

Using the line drawing tool, draw a new curve that accurately takes into account the external benefit, thereby indicating a socially efficient allocation of resources. Properly label you line. Carefully follow the instructions above, and only draw the required objects. To reach the optimal level of production shown in your graph, the government should:

a. start to produce the good
b. pay a subsidy to either the producers or riders
c. tax those receiving the extra benefit
d. do nothing

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