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

ENGR.ECONOMIC ANALYSIS
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ISBN:9780190931919
Author:NEWNAN
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Chapter1: Making Economics Decisions
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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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