2. A factory releases one unit of pollution for each unit of output produced. The marginal cost of production is given b

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2 A Factory Releases One Unit Of Pollution For Each Unit Of Output Produced The Marginal Cost Of Production Is Given B 1 (36.49 KiB) Viewed 57 times

2. A factory releases one unit of pollution for each unit of output produced. The marginal cost of production is given by MC=2+Q, where Q is the number of units of output produced. The demand function for the product is given by Q=20-P. The marginal external cost (damage) from pollution is given by MEC=0.5Q. a. What will be the equilibrium price and quantity if the market is left unregulated? (5 marks] b. What is the socially optimal level of output? [5 marks] c. Compute the deadweight loss due to the externality. [5 marks] d. Compute the Pigovian per-unit tax on output that would result in the socially efficient level of output. (5 marks]