millions of barrels of oil and P is the price per barrel of oil. The marginal private cost of extracting oil is given by MPC = 10 +2Q. Oil extraction gives rise to environmental pollution, such that the marginal social cost of extracting oil is given by MSC = 10 + 3Q. (a) Find the daily proxuction and price of oil if the market for oil extraction is perfectly competitive. (b) Find the socially optimal production and price of oil and explain why it differs from the market outcome in (a). (c) Find the daily production and price of oil if there is a monopoly oil company and
millions of barrels of oil and P is the price per barrel of oil. The marginal private cost of extracting oil is given by MPC = 10 +2Q. Oil extraction gives rise to environmental pollution, such that the marginal social cost of extracting oil is given by MSC = 10 + 3Q. (a) Find the daily proxuction and price of oil if the market for oil extraction is perfectly competitive. (b) Find the socially optimal production and price of oil and explain why it differs from the market outcome in (a). (c) Find the daily production and price of oil if there is a monopoly oil company and
Chapter19: Externalities And Public Goods
Section: Chapter Questions
Problem 19.9P
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