A chemical pesticide producer releases wastes into a nearby river. The negative effects of this waste are not captured by the private market. As a result, there is a market failure, illustrated by the following functions for the inverse demand curve (or Marginal Social Benefit MSB) and inverse supply curve (or Marginal Private Cost MPC) and the marginal external cost (MEC):

P(Q_d) (or MSB) = 60 - 0.3Q

P(Q_s) (MPC) = 30 + 0.2Q

MEC = 0.1Q

1.How do I Find the competitive market equilibrium assuming the market supply is described by theP(Qs)?

2.How do I Find the efficient equilibrium?

3.How would I Sketch the curves for these functions and illustrate the competitive equilibrium and labelP_CandQ_Cand efficient equilibrium (labelingP_EandQ_E).

4. On the diagram from part c, illustrate the areas corresponding to the loss in profit for the firm, the total gain to society and the net gain to society when comparing the competitive equilibrium to the efficient equilibrium.

5.In one sentence, state the Coase Theorem. Based on this theorem, in the example above, who should be given the property rights over river pollution (or no pollution).