Suppose the demand for paper is given by Qd=360-4p and the industry marginal cost of production is given by Qs=6p.in addition the firms production imposes an external toy with an associated marginal damage of MD =2. Please include a graph.
A) what is the net cost to society of producing at the private market equilibrium?
B) suppose the government wants to impose a tax T to correct the externality. What is the T needed to achieve social optimum?
C) by what percentage is production reduced at the social optimum?