Question: We are considering a market for silly string. Silly string can be a lot of fun, and therefore do provide a private benefit to folks,


We are considering a market for silly string. Silly string can be a lot of fun, and therefore do provide a private benefit to folks, but they also create a mess, and so also does produce a negative externality. The Demand (QD) for silly string is given by: QD = 95 - 1p The Private Supply (QSP) is given by: QSP = 2p However, society has a preference for silly string as well, which is captured by the Social Supply (QSS), which is given by: QSS = 2p - 9 In this example, how much does the private market oversupply relative to the social optimum? (hint: This is asking what is the difference between QSP in the private market equilibrium and QSS in the socially optimal equilibrium?)
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