What is the market clearing equilibrium price and quantity

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Reference no: EM13734341

An important way to reduce water pollution from farms is to plant a buffer zone between crops and the water. Economists estimate that for each bush there is a $20 gain in reduced pollution. Supply and demand schedules for the bushes are given below.

Price Demand Supply

$50 1,000 5,000

$40 2,000 4,000

$30 3,000 3,000

$20 4,000 2,000

$10 5,000 1,000

What is the market clearing equilibrium price and quantity?

What is the efficient quantity?

How would Pigou propose correcting this inefficiency?

Draw a diagram illustrating your answer.

Reference no: EM13734341

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