Figure 18P-3 shows supply and demand for planting trees, based on private costs and benefits. Trees sequester carbon, meaning that they help counter-act pollutants that contribute to climate change.

a. Suppose that the carbon sequestration that results from planting a tree is worth $4. Graph the supply curve for tree planting based on the social benefits of trees.
b. How many trees will be planted?
c. What is the socially optimal quantity?
d. How much surplus is lost when suppliers are unable to capture the $4 external benefit they provide from planting trees?

Transcribed Image Text:

Price (S 20 19 16 14 12 10 10 20 30 40 50 60 70 80 Trees