Having some difficulty with this problem. Scenario 2

A. Regulate steel consumption B. subsidize steel production C. Tax steel production The graph to the right shows the demand for private value gasoline. it also shows the private supva oost of producing gas and the social cost associated with producing and oonsuming gas. Examine the costs and benets in the market for gasoline. Since external costs exist in the consumption of gasoline, the social oost of a gallon of gasoline exceeds the private cost. According to the graph if the government does not intervene the equilibrium price of a gallon of gasoline would be - If the government does not intervene in the market for gasoline drivers will consume gallons of gasoline. PRICE 5 m1 5 vama $3. a] 3.? a 3.? a D PRIVATE QUANTIT'I" [In Millions} If the government does intervene in the market for gasoline and impose a tax the equilibrium price of a gallon of gasoline would he the tax on a gallon of gasoline would be and drivers will consume gallons of gasoline. social Cost = Market Equilibrium 2 Efcient Equilibrium = In graph above highlight the Deadweight Loss due to production