Suppose that in the market for paper,demand is p = 100 - Q.The private marginal cost is MC^p = 10 + Q.Pollution generated during the production process creates external marginal harm equal to MC^e = Q.What is the total external harm at the competitive market level of output? A) 1350.5 B) 2025 C) 672.5 D) 1012.5

Question

Quizplus · Accepted Answer

To find the total external harm at the competitive market level of output, we first need to determine the competitive market level of output. In a competitive market without considering externalities, the market equilibrium is where demand equals private marginal cost (PMC). Given the demand function p = 100 - Q and the private marginal cost PMC = 10 + Q, we set them equal to find the equilibrium quantity: 100 - Q = 10 + Q, which simplifies to 90 = 2Q, so Q = 45. The external marginal harm (EMH) is given as Q, so at Q = 45, EMH = 45. To find the total external harm, we integrate the EMH over the quantity, which gives us the area under the EMH curve from 0 to 45. This is calculated as (1/2)*base*height = (1/2)*45*45 = 1012.5.

Suppose That in the Market for Paper,demand Is P =