Question

Assume that the marginal private costs of a firm producing fuel-efficient cars is greater than the marginal social costs. Assume that the marginal private benefits of a firm producing fuel-efficient cars is the same as the marginal social benefits. Discuss one way that the government can try to increase production and sales of fuel efficient cars to the socially desirable amount. Hint: the government is trying to affect production through costs, not benefits.

Short answer

The authorities ought to provide you with regulations on high tax costs for the larger groups and accelerated tax costs for the normal enterprise as a way to set off costs on production method.

Step-by-step solution

Concept Introduction

Marginal social cost (MSC) is the whole price society can pay for the manufacturing of every other unit or for taking similarly motion within the economy.

Marginal Private Cost (MPC) is the exchange inside the manufacturer's general cost delivered about with the aid of the production of an extra unit of an amazing or provider. it's also called marginal cost of manufacturing.

Explanation

Assume that the marginal private price of a firm generating gasoline efficient vehicles is greater than the marginal social fees. Expect that the marginal non-public blessings of a company generating gasoline efficient automobiles is the same as the marginal social advantages. We're going to speak about what a manner that the government can try to boom production and sales of fuel efficient automobiles to socially ideal amount. One manner that the authorities can attain an increase in production and income is thru economies of scale by means of keeping the fee of fuel green automobiles nearly equal to society's most desirable stage and thereby growing its manufacturing to get the anticipated revenue, authorities also can cut down on taxes on the way to preserve profit margins where they need them to be, and, as such, skip at the fee cutting to consumers in order that sales and manufacturing accelerated simultaneously.