question archive 2) Consider the market for guns in Australia
2) Consider the market for guns in Australia
Subject:EconomicsPrice: Bought3
2) Consider the market for guns in Australia. Assume that because some of these guns fall into the hands of criminals, there is a negative consumption externalitv. Illustrate this market on a diagram, and explain the resulting DWL from the market outcome. What is a possible government intervention from the government? Under what circumstances would the optimal level of guns traded be zero? Explain. See lecture notes on negative consumption externalities. For zero trade to be optimal the negative consumption externalitv at q = It} needs to be at least as large as the gap between the PMB curve and the PMC curve.
