The Urban Dictionary defines second-hand rap as the “phenomenon created when some idiot with a loud car stereo believes the entire community would like to have their own music, conversations, or inner peace drowned out by . . . the sound of a car being vibrated apart.” Suppose loud car stereos are produced in a perfectly competitive market and that each stereo creates a negative externality of $50.

a. Draw a hypothetical graph for this market with an upward-sloping supply curve and a downward-sloping demand curve. Label the following:

i. Marginal private cost curve

ii. Marginal social cost curve

iii. Marginal private benefit curve

iv. Marginal social benefit curve

v. Market price

vi. Equilibrium quantity

vii. Eocially optimal quantity

b. Describe two specific remedies that could bring about the socially optimal quantity of loud car stereos.