V. Problem Sets. Write your answer in the space provided. 1. In the movie (Erin Brockovich), suppose the Pacific Gas and Electric Company (PG&E) has the supply and demand curves: Q = 160.000-2.000P Qs = 40,000+2,000P Where Q is measured in cubic feet, and P is price per cubic feet. There is currently no attempt to regulate the dumping of contaminated wastewater into rivers by the PG&E. As a result, dumping is widespread. The marginal external cost associated with the natural gas production is given by the expression: MEC = 0.00020 A. (3 points) Calculate the competitive price and output, assuming that no attempt is made to monitor or regulate the dumping of contaminated wastewater. B. (7 points) Determine the socially optimal levels for price and output. If your answers in (A) and (B) are different, explain the source of the difference. C. (6 points) Sketch a diagram showing the costs or benefits to society of allowing the market to operate in an unregulated fashion. D. (9 points) List at least three ways to solve the externalities. Briefly describe the alternatives? E. (5 points) Can the coarse theorem hold in this case scenario? Explain Yes. V. Problem Sets. Write your answer in the space provided. 1. In the movie (Erin Brockovich), suppose the Pacific Gas and Electric Company (PG&E) has the supply and demand curves: Q = 160.000-2.000P Qs = 40,000+2,000P Where Q is measured in cubic feet, and P is price per cubic feet. There is currently no attempt to regulate the dumping of contaminated wastewater into rivers by the PG&E. As a result, dumping is widespread. The marginal external cost associated with the natural gas production is given by the expression: MEC = 0.00020 A. (3 points) Calculate the competitive price and output, assuming that no attempt is made to monitor or regulate the dumping of contaminated wastewater. B. (7 points) Determine the socially optimal levels for price and output. If your answers in (A) and (B) are different, explain the source of the difference. C. (6 points) Sketch a diagram showing the costs or benefits to society of allowing the market to operate in an unregulated fashion. D. (9 points) List at least three ways to solve the externalities. Briefly describe the alternatives? E. (5 points) Can the coarse theorem hold in this case scenario? Explain Yes