Explain how a government can use a tax on dry cleaning to bring about the efficient level of production. A. The government can use a tax to increase the marginal private benefit of consuming dry cleaning to equal the marginal social benefit. B. The government can use a tax to decrease the marginal private benefit of consuming dry cleaning to equal the marginal social benefit. C. The government can use a tax to decrease the marginal social cost of producing dry cleaning to equal the marginal private cost. D. The government can use a tax to increase the marginal private cost of producing dry cleaning to equal the marginal social cost. E. The government can use a tax to decrease the marginal private cost of producing dry cleaning to equal the marginal social cost.

The Marginal Private Cost(MPC) is the cost that a company incurs per producing an additional good while Marginal Social Cost(MSC) is the cost incurred by the society (third parties) due to an additional good being produced. This includes marginal private costs as well.

The government should tax firms in such a way that they will see that MPC equal their MSC because this would ensure that they feel the full weight of the effects that their production is placing on the society. This will encourage them to produce at an efficient level that would reduce costs as much as possible especially MSCs.

Tundexi Tundexi · Answer 2 · 2021-12-30T11:25:37+01:00

The government can use a tax on dry cleaning to bring about the efficient level of production by increasing the marginal private cost of producing dry cleaning to equal the marginal social cost.

A Marginal Private Cost refers to the cost that a company incurs per producing an additional good.

Marginal Social Cost refers to the cost incurred by the society (third parties) due to an additional good being produced and includes the marginal private costs as well.

Now, if the government tax firms in such a way that they will see that MPC equal their MSC, then, it will ensure that they feel the full weight of the effects that their production is placing on the society.

Hence, the government can use a tax on dry cleaning to bring about the efficient level of production by increasing the marginal private cost of producing dry cleaning to equal the marginal social cost.

Therefore, the Option D is correct.

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