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A steel manufacturer is located close to a large town. During production it emits sulphur which creates an

external cost to the local community. Considering the private costs of production and the private benefits

to steel buyers, who are mainly cars producers, along with the estimated external costs;

a) Draw a graph to show market price and quantity and plot the effects of including external costs.

Show the socially efficient output of steel.

b) What remedies could the authorities employ to deal with the problem of external costs?