The demand curve for electricity is . The marginal cost of electricity production is . The marginal cost of pollution due to electricity production is . Find the competitive equilibrium output and the social optimum output.
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The demand curve for electricity is D(p)=120-p. The marginal cost of electricity production is MC₁(q)=20+q. The marginal cost of pollution due to electricity production is MC₂(q)=3q. Find the competitive equilibrium output and the social optimum output. (A) 50;20 (B) 50;30 (C) 60;20 (D) 60;30
Also written as: The demand curve for electricity is D(p)=120-p. The marginal cost of electricity production is MC_1(q)=20+q. The marginal cost of pollution due to electricity production is MC_2(q)=3q. Find the competitive equilibrium output and the social optimum output.
Market failure, externalities and public goods has come up 114 times in 7 exams since 2006.
This question is on Externalities and the social optimum, part of Market failure, externalities and public goods in Microeconomics.
Costs or benefits that fall on others, and why the private and socially efficient outputs differ.
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Question from the DSE 2012 paper. Solutions are TestStop's own. Not affiliated with or endorsed by any examination authority.