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2. Demand and supply for Z are given by: Demand: Q=55 -5P Supply: P=1+.3Q Production of Z generates an external cost of : MEC =

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2. Demand and supply for Z are given by: Demand: Q=55 -5P Supply: P=1+.3Q Production of Z generates an external cost of : MEC = .50 a. Find the MPB of the 10th unit. b. Find the unregulated equilibrium price and quantity. c. Find the MSC of the 20th unit. d. Find the efficient level of output e. Find the deadweight loss if nothing is done to correct the externality problem f. Draw D. MPC and MSC in the same diagram. Put in the numbers for the equilibrium output and price, the efficient output and shade in the deadweight loss. g. What Pigouvian tax policy would bring about the efficient level of output? h. How much revenue does the tax generate

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