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3. Suppose that the inverse demand curve1 for paper is p : 200 Q, the private marginal cost (unregulated competitive market supply) is M C
3. Suppose that the inverse demand curve1 for paper is p : 200 Q, the private marginal cost (unregulated competitive market supply) is M C = 80 + Q and marginal harm from pollution emissions is l'lrfIC'3 : Q. a). What is the unregulated competitive equilibrium? b). What is the social optimum? What specic tax (per unit of output or gunk) results in the social optimum? c). If the paper industry is perfectly competitive, would we expect an emissions standard (each rm is told how much pollution it is allowed to emit) to result in an efcient allocation of pollution assuming the regulator set the standard for the optimal quantity of pollution to be emitted
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