Determine tax that would in a monopolistic market producing

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Q. In a market for dry cleaning, inverse market demand function is given by P = 100 - Q and (private) marginal cost of production for aggregation of all dry-cleaning firms is given by MC=10+Q. Finally, pollution generated by dry cleaning process creates external damages given by marginal external cost curve MEC = Q.

a. Calculate output and price of dry cleaning if it is produced under competitive conditions without regulation.

b. Determine socially efficient dry cleaning.

c. Determine tax that would in a competitive market producing socially efficient output.

d. Calculate output and price of dry cleaning if it is produced under monopolistic condition without regulation.

e. Determine tax that would in a monopolistic market producing socially efficient output.

f. Assuming that no attempt is made to monitor or regulate pollution, which market structure yields higher social welfare? Discuss.

Reference no: EM1372480

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