Reference no: EM132617596
A number of firms produce the same good and, in the process, emit fumes that negatively affect the residents of the city.
The market demand is given by the following function:
Q = 100 - P
The private marginal cost of production is given by the following function:
M C = 10 + Q
The marginal external cost curve is given by:
M E C = Q
a). Calculate the output and price in the market under competitive conditions without regulation.
b). Determine the socially efficient price and output.
c). Determine the tax that would result in a competitive market producing the socially efficient output.
d). Calculate the output and price in a monopolistic market without regulation.
e). Determine the tax that would result in a monopolistic market producing the socially efficient output.
f). Assuming that no effort is made to monitor or regulate the pollution, which market structure yields higher social welfare? Discuss.