Suppose that the inverse demand curve for paper is p = 200 Q, the private marginal

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Suppose that the inverse demand curve for paper is p = 200 – Q, the private marginal cost (unregulated competitive market supply) is MCp = 80 + Q, and the marginal external harm from emissions is MCx = Q. Determine the unregulated competitive equilibrium and the social optimum (where total surplus is maximized). What specific tax (per unit of output) would achieve the social optimum?

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Managerial Economics and Strategy

ISBN: 978-0321566447

1st edition

Authors: Jeffrey M. Perloff, James A. Brander

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