Question
3. The effect of negative externalities on the optimal quantity of consumption Consider the market for paper. Imagine that a paper factory dumps toxic waste
3. The effect of negative externalities on the optimal quantity of consumption Consider the market for paper. Imagine that a paper factory dumps toxic waste into a nearby river, creating a negative externality for those living downstream from the factory. Producing an additional tonne of paper imposes a constant external cost of $105 per tonne. The following graph shows the demand (private value) curve and the supply (private cost) curve for paper. Use the purple points (diamond symbol) to plot the social cost curve when the external cost is $105 per tonne. |
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