Suppose the market for a certain good has an inverse demand of ? = 180 −...

Suppose the market for a certain good has an inverse demand of ? = 180 − ?. The aggregate private marginal cost for the firms that produce the good is ?? = 20 + ?. However, production of the good also creates pollution with an external marginal cost of ??? = 10 + ?/2.

If this is a perfectly competitive market with no regulation, what is the equilibrium price and quantity produced?
Suppose instead that the market is a monopoly. Calculate the profit-maximizing price and quantity.
Determine the socially efficient price and quantity for the good.
Calculate the socially optimal per-unit tax to levy on the competitive firm and the monopolist respectively to make them produce at the socially efficient level.

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Expert Solution

Rahul Sunny answered 1 year ago

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