Because of the trash that they tend to produce, soda cans provide a negativeexternality. Inverse demand and supply are P = 40 — Q0 and P = 10 + 2QS.

Demand and marginal social benefit are the same, but MSC = 15 + 4Q.

a. Graph D, S, MSC, and MSB, noting that S and MSC have different slopes.

b. Solve for the market and efficient quantities, and the optimal Pigouvian tax.

c. Graph the effect of the Pigouvian tax.