Back to Assignment Attempts Keep the Highest / 3 3. The effect of negative externalities on the optimal quantity of consumption BE Consider the market for steel. Suppose that a steel manufacturing plant dumps toxic waste into a nearby river, creating a negative externality for those living downstream from the plant. Producing an additional ton of steel imposes a constant marginal external cost (MEC) of $220 per ton. The following graph shows the demand (marginal private benefits, or MPB) curve and the supply (marginal private costs, or MPC) curve for steel. Use the purple points (diamond s) bol) to plot the marginal social costs (MSC) curve when the marginal external cost is $220 per ton. ? (?) 1100 990 MSC BBO 770 Supply (MPC) PRICE (Dollars per ton of steel) Demand (MPB) 110 QUANTITY (Tons of steel) The market equilibrium quantity is _ tons of steel, but the socially optimal quantity of steel production is _ tons. To create an incentive for the firm to produce the socially optimal quantity of steel, the government could impose a of $ per ton of steel. Grade It Now Save & Continue Continue without saving