The local refinery operates with a private marginal cost of MC=10Q, where Q is one hundred gallons
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The local refinery operates with a private marginal cost of MC=10Q, where Q is one hundred gallons of gasoline. As the refinery increases its production, the economic cost on the nearby water system is as follows, EMC=1Q. Consumers demand for gasoline is P=100-Q. Answer the following questions. [3 points] Graph the private supply and demand curves and external marginal cost. [6 points] Calculate the market output and the market price and the dead-weight loss. Label these on the above graph. Interpret the dead-weight loss in a sentence. [3 points] Now the government imposes a tax on the firm to help pay for the water cleanup. How large should the tax be?
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