1. Externalities in the electricity utility industry The following equations represent the supply and demand for electricity in Pennsylvania, a state where the electricity market has been deregulated and is now operating as a competitive market. Quantity is measured in 1005 of kilowatt hours (100 kWh). Demand QB : 1P+5 5 Supply QS : P 1 (a) Graph the supply and demand curves for electricity (b) Calculate algebraically the equilibrium price and quantity assuming a perfectly competitive market. Label this point on your graph from (a). The electric utilities also generate sulfur dioxide (30;) as a byproduct of their production of electricity. 80; has health consequences, namely particulate matter om these emissions can lead to respiratory ailments. SO; also has ecosystem effects, namely it is a precursor to acid rain. A careful study has been conducted to determine the costs of 302 emissions and the following function describes these costs: Marginal Costs of SO2 MCso, : 4QS +4 (c) Calculate the Marginal Social Cost of electricity generation and add it to the graph from part (a) (d) Algebraically solve for the socially efcient level of electricity generation and the socially efcient price. Label this point on your graph. (e) Mathematically calculate the social welfare loss resulting from the extemality. Shade in the area of welfare loss on your graph