Determine the pigou tax that achieves the social optimum

Reference no: EM132133705

Question: Consider an industry with demand q = 120 - 3p and supply q = 2p - 10. Suppose that production is polluting the environment and that the marginal social cost of production is given by MSC(q) = 1/2 q^2.

(a) What is the level of production in the market equilibrium?

(b) What is the socially optimal level of production?

Reference no: EM132133705

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