The private market estimates the demand (MPB) and supply (MPC) for a barrel of oil asp =40-.125Qand P= 20+ .075Q respectively, where Q is the number of barrels and b is the price.
What is the equilibrium price and quantity ?
If you include a Marginal External cost of .08Q how would your answer be different?
What would be the change in consumer and producer surplus – use a new graph?
How would the economist justify the loss in consumer and producer surplus?