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Now suppose that the economist on the faculty at SCU determines that there is a production externality associated with this good, such that, the


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Now suppose that the economist on the faculty at SCU determines that there is a production externality associated with this good, such that, the social supply curve (SMC) is represented by the following equation: QSocial=200*P. Note, the other curves are still represented by the following 3 equations: QPrivate = 100*P, Q,Private 1,000-100*P. and QpSocial = 2,000-200*P. Again, assume no government or any additional market failures. Please draw a supply and demand diagram with each of the following items clearly indicated on the graph. If an item below does not exist explicitly state that it does not exist (5 points): (i) (ii) (iii) (iv) (v) (vi) (vii) (viii) (ix) (x) - PMC curve (make sure you clearly label at least two points along the supply curve) SMC curve (make sure you clearly label at least two points along the supply curve) PMB curve (make sure you clearly label at least two points along the demand curve) SMB curve (make sure you clearly label at least two points along the demand curve) Market price Market quantity Social optimum quantity Total External Benefit Total External Cost DWL

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Supply and Demand with Production Externality Market Structure This scenario depicts a market with a negative production externality meaning production creates social costs not borne by the producer C... blur-text-image

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