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What is the market clearing equilibrium price and quantity

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An important way to reduce water pollution from farms is to plant a buffer zone of bushes between crops and the water. Economists estimate that for each bush planted there is a $20 gain in reduced pollution. Market supply and demand curves 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

a. What is the market clearing equilibrium price and quantity?

b. What is the efficient quantity?

c. How would Pigou propose correcting this inefficiency?

Reference no: EM131829243

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