Society of producing at the private market equilibrium

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Reference no: EM131006427

Suppose the demand for paper is given by Qd=360-4p and the industry marginal cost of production is given by Qs=6p.in addition the firms production imposes an external toy with an associated marginal damage of MD =2. Please include a graph.

A) what is the net cost to society of producing at the private market equilibrium?

B) suppose the government wants to impose a tax T to correct the externality. What is the T needed to achieve social optimum?

C) by what percentage is production reduced at the social optimum?

Reference no: EM131006427

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