What is the net cost of society of producing

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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 firm’s production imposes an externality with an associated marginal damage (MD) = 2. Please include a graph with your answer. a. What is the net cost of 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: EM13998971

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