1a. What are the equilibrium price and quantity for coal red electricity when there is no correction for the externality?

1b. How much coal electricity should the market supply at the social optimum?

1c. How large is the deadweight loss from the externality?

1d. In order to achieve the social optimum , government impose a per-unit fee on emissions. How large must the emission fee be if the market is to produce the socially efficient amount of coal electricity?

A coal power plant releases air pollution into the atmosphere for every unit of electircity produced. The inverse demand function for electricity is Pa = 20 Q which represents the marginal benefit curve where Q is the quantity consumed when consumers pay price Pd. The inverse supply curve for electricity is P = 5 + Q. which represents the marginal private cost curve when the power plant produces Q units. The marginal damage from emissions is given by MD = 3.5Q, which describes the cost of greenhouse gas emissions and local air pollution when the industry generates Q units of electricity.