The market for oil-based paint is shown in the following table:
Suppose the production of the paint creates a negative externality of $10 for each unit of paint, which is the cost of repairing the damage to the environment caused by the paint-generated pollution. What is the extent of market failure in this situation? What price and quantity does the market generate, and what price and quantity should it generate to achieve an efficient use of resources? How can this outcome be obtained?
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