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Suppose that the inverse demand curve for paper is P = 200 -@, the private marginal cost (unregulated competitive market supply) is MC = 80
Suppose that the inverse demand curve for paper is P = 200 -@, the private marginal cost (unregulated competitive market supply) is MC" = 80 + Q, and the marginal harm from gunk is MOS = Q. a) What is the unregulated competitive equilibrium? Note that this is deter- mined by the intersection of the private marginal-cost curve and the demand curve. b) What is the social optimum? What specific tax (per unit of output or gunk) results in the social optimum? Note that the socially optimum equilibrium
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