Calculate the magnitude of the deadweight loss resulting

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Two hundred paper mills compete in the paper market. The total cost of production (in dollars) for each mill is given by the formula TC = 500Qmill + (Qmill) 2 where Qmill indicates the mills annual production in thousands of tons. The marginal cost of production is MC = 500 + 2Qmill. The external cost of a mill’s production (in dollars) is given by the formula EC = 40Qmill + (Qmill) 2 and the marginal external cost of production is MEC = 40 + 2Qmill. Finally, annual market demand (in thousands of tons) is given by the formula Qd = 150,000 100P where P is the price of paper per ton. Using algebra, find the competitive equilibrium EC 301, Spring 2015. Problem set 6 Page 2 of 2 price and quantity, as well as the efficient quantity. Calculate the magnitude of the deadweight loss resulting from the externality. Illustrate your solution with graphs.

Reference no: EM13774270

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