Consider a firm producing outputq

q

. The marginal costs of production areM

C

=

a

+

b

q

MC=a+bq

and the per unit output priceisp

p

. Additionally, there are marginal externalities equal toM

E

=

c

q

ME=cq

. Without regulation, how many units ofq

q

would the firm produce?

Please use the following parameter values:p

=

5

p=5

,a

=

3

a=3

,b

=

1

b=1

,c

=

5

c=5