Economic efficiency also externality related problem
(External Costs) Use the data in the table to the right to answer the following questions.
a. Illustrate what is the external cost per unit of production?
b. Illustrate what level is produced if there is no regulation of the externality?
c. Illustrate what level should be produced to achieve economic efficiency?
d. Compute the dollar value of the net gain to society from correcting the externality.
|
Quantity
|
Marginal Private Benefit (demand)
|
Marginal Private Cost(supply)
|
Marginal
Social
Cost
|
|
0
|
--
|
$0
|
$0
|
|
1
|
$10
|
2
|
4
|
|
2
|
9
|
3
|
5
|
|
3
|
8
|
4
|
6
|
|
4
|
7
|
5
|
7
|
|
5
|
6
|
6
|
8
|
|
6
|
5
|
7
|
9
|
|
7
|
4
|
8
|
10
|
|
8
|
3
|
9
|
11
|
|
9
|
2
|
10
|
12
|
|
10
|
1
|
11
|
13
|