Consider the market for steel. Suppose that a steel manufacturing plant dumps toxic waste into a nearby river, creating a negative externality for those living downstream from the plant. Producing an additional ton of steel imposes a constant external cost of $245 per ton. The following graph shows the demand (private value) curve and the supply (private cost) curve for steel.   Use the purple points (diamond symbol) to plot the social cost curve when the external cost is $245 per ton. The market equilibrium quantity is _______   tons of steel, but the socially optimal quantity of steel production is _______   tons. To create an incentive for the firm to produce the socially optimal quantity of steel, the government could impose a ___subsidy or tax______ of ______ per ton of steel.

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