Consider a steel market. The marginal private cost function is written by MPC=40+2Q, where Q is the quantity of steel produced in the market. The marginal private benefit function is written by MPB=200-2Q, where Q is the quantity of steel consumed in the market. This market creates a negative production externality: the marginal external cost function is given by MEC=Q, where Q is the quantity of steel produced in the market. This market does not create any external benefit. All benefits and costs are measured in dollars.
Consider a steel market. The marginal private cost function is written by MPC=40+2Q, where Q is the quantity of steel produced in the market. The marginal private benefit function is written by MPB=200-2Q, where Q is the quantity of steel consumed in the market. This market creates a negative production externality: the marginal external cost function is given by MEC=Q, where Q is the quantity of steel produced in the market. This market does not create any external benefit. All benefits and costs are measured in dollars.
Chapter1: Making Economics Decisions
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Consider a steel market. The marginal private cost function is written by MPC=40+2Q, where Q is the quantity of steel produced in the market. The marginal private benefit function is written by MPB=200-2Q, where Q is the quantity of steel consumed in the market. This market creates a negative production externality: the marginal external cost function is given by MEC=Q, where Q is the quantity of steel produced in the market. This market does not create any external benefit. All benefits and costs are measured in dollars.
What is the total external cost created by the steel market in the competitive market?
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