A huge paper recycling plant sits about a mile away from a college campus. When the wind is blowing towards campus, emissions from the plant can be smelled on campus. The marginal social benefit of recycled paper can be represented by the equation MSB=600-Q. The market internalizes the external benefits of recycled paper but not the external costs. The marginal external cost of the emissions is given by MEC=Q. The supply of recycled paper can be represented P=2Q. In the absence of any bargaining or government intervention, what are the private competitive market output and price of paper? What is the optimal tax on output of recycled paper? (solve for the number)
A huge paper recycling plant sits about a mile away from a college campus. When the wind is blowing towards campus, emissions from the plant can be smelled on campus. The marginal social benefit of recycled paper can be represented by the equation MSB=600-Q. The market internalizes the external benefits of recycled paper but not the external costs. The marginal external cost of the emissions is given by MEC=Q. The supply of recycled paper can be represented P=2Q. In the absence of any bargaining or government intervention, what are the private competitive market output and price of paper? What is the optimal tax on output of recycled paper? (solve for the number)
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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A huge paper recycling plant sits about a mile away from a college campus. When the wind is blowing towards campus, emissions from the plant can be smelled on campus. The marginal social benefit of recycled paper can be represented by the equation MSB=600-Q. The market internalizes the external benefits of recycled paper but not the external costs. The marginal external cost of the emissions is given by MEC=Q. The supply of recycled paper can be represented P=2Q. In the absence of any bargaining or government intervention, what are the private competitive market output and
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