Furthermore, suppose that the marginal external damage of this product is $12 per unit. How many more units of this product will the free market produce than is socially optimal? Calculate the deadweight loss associated with the externality.

Principles of Microeconomics
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ISBN:9781305156050
Author:N. Gregory Mankiw
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Chapter10: Externalities
Section10.3: Private Solutions To Externalities
Problem 3QQ
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3. Suppose that demand for a product is Q = 1200 – 4P and supply is Q = -240 + 2P.
Furthermore, suppose that the marginal external damage of this product is $12 per unit.
How many more units of this product will the free market produce than is socially
optimal? Calculate the deadweight loss associated with the externality.
Transcribed Image Text:3. Suppose that demand for a product is Q = 1200 – 4P and supply is Q = -240 + 2P. Furthermore, suppose that the marginal external damage of this product is $12 per unit. How many more units of this product will the free market produce than is socially optimal? Calculate the deadweight loss associated with the externality.
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