Use the purple points (diamond symbol) to plot the social cost curve when the external cost is $90 per unit. PRICE (Dollars per unit of electricity) 600 540 480 420 360 300 Supply (Private Cost) 240 180 120 60 0 2 3 QUANTITY (Units of electricity) Demand (Private Value) Social Cost The market equilibrium quantity is 3.5 units of electricity, but the socially optimal quantity of electricity production is_ units. To create an incentive for the firm to produce the socially optimal quantity of electricity, the government could impose a unit of electricity. of per
Use the purple points (diamond symbol) to plot the social cost curve when the external cost is $90 per unit. PRICE (Dollars per unit of electricity) 600 540 480 420 360 300 Supply (Private Cost) 240 180 120 60 0 2 3 QUANTITY (Units of electricity) Demand (Private Value) Social Cost The market equilibrium quantity is 3.5 units of electricity, but the socially optimal quantity of electricity production is_ units. To create an incentive for the firm to produce the socially optimal quantity of electricity, the government could impose a unit of electricity. of per
Chapter8: Market Failure
Section: Chapter Questions
Problem 2P: Draw a standard supply and demand diagram for televisions, and indicate the equilibrium price and...
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