3. Suppose the demand function (D), marginal production cost (MPC) func- tion and marginal pollution damages (MLD) function are as follows: D: p = 40-0.5Q MPC = 20 +0.4Q MLD = 1.6Q Calculate

a) the privately and socially efficient rates of production,

b) net social benefit with socially efficient production, and

c) the Pareto-relevant externality. 4. Marginal private benefit of pollution abatement (MPBA), marginal social benefit of pollution abatement (MSBA) and marginal cost of pollution abatement (MCA) are as follows: MPBA=5-A MSBA 12-2A MCA = 0.75A A is the level of pollution abatement. Calculate

a) the privately efficient pollution abatement,

b) the socially efficient pollution abatement, and

c) the Pigouvian tax.