1. How do you draw a supply and demand graph for the market for electricity produced by coal.Indicate the market equilibrium? Then, assuming that there's a fixed social cost not borne by the supplier or consumer (externality), how would you draw the social marginal cost curve and indicate the socially optimal (efficient) price and quantity?
2. There are two equally likely types of employees, good with values of $20/hr and bad with values of $10/hr, and the good employees have outside opportunities to make $16/hr while the bad have outside opportunities to make $8/hr, how would you describe the efficient market outcome? Now, assume that employers are willing to pay employees based on the average of their value to the enterprise.What is the equilibrium in this market if employers can't tell good and bad employees apart but can discern average quality?