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Posted: **Sun May 08, 2022 9:29 am**

: Suppose That A Wood Pulp Mill Is Situated On A Bank Of The River Tay The Private Marginal Cost Mpc Of Producing Wood 1 (50.16 KiB) Viewed 32 times

: Suppose That A Wood Pulp Mill Is Situated On A Bank Of The River Tay The Private Marginal Cost Mpc Of Producing Wood 2 (16.52 KiB) Viewed 32 times

Suppose that a wood pulp mill is situated on a bank of the River Tay. The Private Marginal Cost (MPC) of producing wood pulp (in £ per ton) is given by the function MPC = 5 +0.5Y where Y is tons of wood pulp produced. In addition to this private marginal cost, an external cost is incurred. Each ton of wood pulp produces pollutant flows into the river which cause a fixed damage valued at £10. This is an external cost, as it is borne by the wider community but not by the polluting firm itself. The Marginal Private Benefit (MPB) to society of each ton of produced pulp, in £, is given by MPB = 30 - 0.5Y
(15 marks) c) Draw a diagram illustrating and explaining the net gain for the society as we move from the competitive to the efficient equilibrium. (20 marks) d) Explain and discuss with the use of a diagram whether the socially efficient level of outnut could ho