"The gasoline tax is an important policy tool to control externalities" according to a recent economics paper.
a) Use a graph to show a competitive market for gasoline, showing the impact of the externality prices, quantities, and deadweight loss.
b) Using the same diagram, explain how a gasoline tax can be viewed as a remedy for the externa
c) What is the advantage of a tax on gasoline in comparison with another remedy recently proposed the corporate average fuel economy (CAFE) standard which requires that by 2025 cars and light trucks get an average of 54.5 miles per gallon (mpg) of gasoline up from the 27.5 mpg standard effect since 1990? Briefly explain.

Suppose of a single firm delivers water through a system of pipes (owned by that firm) to a large number houses in a residential area. Suppose also that the marginal cost of the firm is a constant.
a) Graphically draw a model of this firm showing the average total cost (ATC), marginal cost (MC), demand, marginal revenue, and the profit maximizing price and quantity.
b) What is the market failure that provides a rationale for the government to intervene in the market for water? Why is regulating the price of this firm rather than breaking it up into smaller firms a better way to deal with the market failure?
c) Describe MC-pricing and ATC-pricing as two different ways that the government could regulate the price, and use your graph to explain why one way is better than the other labeling any relevant prices and quantities
d) Explain how government intervention to remedy the market failure could result in government failure.

Indicate whether each of the following statements is true or false, and explain each of your answers.
a) The forces of competition tend to reduce the impact of discrimination on wages and employment over time. [Draw a diagram of a model of the labor market as part of your answer.]
b) The deadweight loss of a tax on salt is smaller than the deadweight loss of a tax on fresh tomatoes. [Draw supply-demand diagrams as part of your answer.]
c) Suppose Industry A consists of five equally-sized firms, while Industry B consists of six firms: one with a 40% market share, one with a 20% share, and four equally-sized smaller firms. According to the Herfindahl-Hirschman Index, Industry A is more "concentrated" than Industry B. [Compute the HHI for each industry as part of your answer.]
d) The quantity of physical capital demanded by firms declines as the interest rate rises.

&quot;The gasoline tax is an important policy tool to control exter...

"The gasoline tax is an important policy tool to control exter...