The external marginal cost of producing coal is MC_external = 6Q while the internal marginal cost is MC_internal = 4Q.The inverse demand for coal is given by P = 120 − 2Q.What is the socially efficient level of output? A) 10 B) 20 C) 15 D) 8

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The socially efficient level of output is where the marginal social cost (MSC) equals the marginal benefit (MB). The MSC is equal to the internal marginal cost (MC) plus the external marginal cost (MEC). In this case, the MSC is MC + MEC = 4Q + 6Q = 10Q. The MB is equal to the inverse demand curve, which is P = 120 - 2Q. Setting MSC equal to MB, we get 10Q = 120 - 2Q, which solves for Q = 10.

The External Marginal Cost of Producing Coal Is MCexternal =

The External Marginal Cost of Producing Coal Is MC_external =