In terms of resulting output level and price

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Reference no: EM13739823

Assume the total value of paper to society ( measuring willingness to pay) is given by the expression

TB= 1000Q-.25Q^2 where Q is the quantity of paper produced

Further assume the total cost of paper production that are directly borne by producers is:

TPC=150Q+.1Q^2

Additionally there are pollution damage costs for which the external cost can be described as

ETC= 100Q+.15Q^2

If the paper market is competitive and in all other ways operates according to the theory of supply and demand, and if the externality is un corrected, what will be the market equilibrium, in terms of resulting output level and price?

Reference no: EM13739823

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