The supply and demand conditions facing a firm that makes Air Conditioners and generates a negative externality by dumping a highly toxic sludge in a nearby river is given in the below.

Price	Quantity Demanded	Quantity Supplied without Social Costs	Quantity Supplied paying Social Costs
$2000.00	0	1800	1500
$1800.00	700	1500	1200
$1450.00	900	1200	900
$1250.00	1000	1000	700
$1050.00	1500	800	500
$850.00	1800	500	200

Using the information in the table:

a. Identify the equilibrium price and quantity produced when only Private Costs (without Social Costs) are taken into account.

b. Identify the equilibrium price and quantity when the government tries to correct the externality and the firm must include Social Costs.

Answer rating: 100% (QA)

a The equilibrium price and quantity produced when only Priv... View the full answer