Figure 18P-4 shows supply and demand for planting trees, based on private costs and benefits. Trees sequester
Question:
a. Suppose that the carbon sequestration that results from planting a tree is worth $4. Graph the social cost curve for tree planting that accounts for the positive externality of trees.
b. Ignoring the positive externality, how many trees will be planted?
c. What is the socially optimal quantity of trees?
d. What is the deadweight loss that occurs when suppliers are unable to capture the $4 external benefit they provide from planting trees? Graph the deadweight loss.
Figure 18P-4:
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a The social cost curve is 4 less than the private cos...View the full answer
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