What is the market equilibrium and the deadweight loss

Reference no: EM132208427

Question: PMC of producing paint is given by PMC (q) = 10 + 2q. There is a negative externality in the production of paint and the marginal external cost is given by MEC = 0.6 q. The demand function for paint is given by P = 100 - q.

a) What is the market equilibrium and the deadweight loss due to the externality if no active policies are pursued?

b) If the government can apply a per unit tax to make the market efficient, what would be the amount?

Reference no: EM132208427

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