Suppose the equation for the demand curve in a market is P=100 – 2Q. Also, suppose the equation for the supply curve in the same market is P=10+3Q. Suppose there is an external cost of $20 associated with the production of each unit of the good. The socially optimal price is $8 greater than the market equilibrium price. $12 greater than the market equilibrium price. $8 smaller than the market equilibrium price. $12 smaller than the market equilibrium price.
Suppose the equation for the demand curve in a market is P=100 – 2Q. Also, suppose the equation for the supply curve in the same market is P=10+3Q. Suppose there is an external cost of $20 associated with the production of each unit of the good. The socially optimal price is $8 greater than the market equilibrium price. $12 greater than the market equilibrium price. $8 smaller than the market equilibrium price. $12 smaller than the market equilibrium price.
Chapter14: Environmental Economics
Section: Chapter Questions
Problem 2SQ
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