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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= b) The socially efficient quantity is QSOC= c) To achieve efficiency, the government can introduce a

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= b) The socially efficient quantity is QSOC= 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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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= b) The socially efficient quantity is QSOC= c) To achieve efficiency, the government can introduce a
Transcribed Image Text: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= b) The socially efficient quantity is QSOC= c) To achieve efficiency, the government can introduce a
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Negative externality occur when production or consumption of a good has a negative effect on a third party who is independent of the transaction.

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