Answer Happy

The market for paper in a particular region in the United States is characterized by the following demand and supply curves: QD=145,000 -2,000P and Qs = 40,000+ 2,000P where Q is the quantity demanded in 100-pound lots, Q is the quantity supplied in 100-pound lots, and P is the price per 100-pound lot. Currently there is no attempt to regulate the dumping of effluent into streams and rivers by the paper mills. As a result, dumping is widespread. The marginal external cost (MEC) associated with the production of paper is given by the curve MEC = 0.0006QS- a. Calculate the output and price of paper if it is produced under competitive conditions and no attempt is made to monitor or regulate the dumping of effluent. (Enter your responses rounded to two decimal places.) Without regulation, the price is $262.5 per 100-pound lot, and the quantity is 93000 100-pound lots. b. Determine the socially efficient price and output f paper. (Enter your responses rounded to two decimal places.) The socially efficient price is $ per 100-pound lot, and the socially efficient quantity is 100-pound lots. c. Explain why the answers you calculated in parts (a) and (b) differ. In part (a), the external costs were ignored; thus, too much output was produced at too and thus produced the efficient quantity. of a price. In part (b), firms the marginal external cost,