Question
2 Q2. The supply of fertilizer is described by the following equation: = 3,000 where is the supply per year and is the price of
2 Q2. The supply of fertilizer is described by the following equation: = 3,000 where is the supply per year and is the price of fertilizer per ton. The demand for fertilizer is described by: = 500,000 20,000 where is tons of fertilizer demanded per year. The marginal external costs of $30 are associated with the production of each ton of fertilizer due to the pollution related to fertilizer production. Answer the following questions and explain your answers by showing your work. a. Assuming that fertilizer is sold in a competitive market, what is the market price? b. How many tons of fertilizer will be produced per year at that price? c. Is the market equilibrium efficient? Explain your answer.
d. What is the efficient quantity and output?
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