Consider a Monopolist with a Private MC of $20 Per

Multiple Choice

Consider a monopolist with a private MC of $20 per unit who faces a demand curve of P = 100 - q.There is also a negative consumption externality in the market of $40 per unit.What is the most appropriate policy response if the government wishes to maximize surplus in the market.

A) The government should implement a Pigovian tax of $40 on consumers.
B) The government should implement a Pigovian tax of $40 levied on the monopolist.
C) The government should subsidize production by $40 per unit.
D) Either a or B