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External Cost Suppose the external marginal cost of pollution is MCext 5Q and the internal marginal cost is MCint 10Q Further

External Cost

Suppose the external marginal cost of pollution is MCext =
5Q and the internal marginal cost is MCint = 10Q Further, assume the inverse
demand for the product, Q, is given by P = 90-Q

 

a What is the socially efficient level of output?

 

b How much output would a competitive industry produce?

 

c How much output would a monopoly produce?

 

d Discuss three ways government can induce firms to produce
the socially efficient level of output

Mar 16 2020 View more View Less

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