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QUESTION 8 The market for good Q is perfectly competitive. However, it features negative externalities. Consumers' marginal benefit is MB = 90-Q Producers' marginal private cost is MC = Q. The production of this good generates a marginal external cost MEC=4. a) In the equilibrium of this market, the perfect competition quantity is Qpc= 45 b) The socially efficient quantity is Qsoc 43 c) To achieve efficiency, the government can introduce a

QUESTION 8 The market for good Q is perfectly competitive. However, it features negative externalities. Consumers' marginal benefit is MB = 90-Q Producers' marginal private cost is MC = Q. The production of this good generates a marginal external cost MEC=4. a) In the equilibrium of this market, the perfect competition quantity is Qpc= 45 b) The socially efficient quantity is Qsoc 43 c) To achieve efficiency, the government can introduce a

Economics (MindTap Course List)
Economics (MindTap Course List)
13th Edition
ISBN:9781337617383
Author:Roger A. Arnold
Publisher:Roger A. Arnold
Chapter30: Market Failure: Externalities, Public Goods, And Asymmetric Information
Section: Chapter Questions
Problem 8QP
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QUESTION 8 The market for good Q is perfectly competitive. However, it features negative externalities. Consumers' marginal benefit is MB = 90-Q Producers' marginal private cost is MC = Q. The production of this good generates a marginal external cost MEC=4. a) In the equilibrium of this market, the perfect competition quantity is Qpc= 45 b) The socially efficient quantity is Qsoc= 43 c) To achieve efficiency, the government can introduce a
Transcribed Image Text:QUESTION 8 The market for good Q is perfectly competitive. However, it features negative externalities. Consumers' marginal benefit is MB = 90-Q Producers' marginal private cost is MC = Q. The production of this good generates a marginal external cost MEC=4. a) In the equilibrium of this market, the perfect competition quantity is Qpc= 45 b) The socially efficient quantity is Qsoc= 43 c) To achieve efficiency, the government can introduce a
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