Supose that in a perfectly competitive market, the demand curve is given by P=100-Q, the supply curve is given by P=20+Q.
1) In a single graph, represent the demand curve as well as the supply and social supply curves. Solve for both the equilibrium and the efficient equilibrium.
2) Which type of externality does this represent? Give real life situations.
3) What could the government do to correct this externality?