Suppose that the supply and demand for good H is described by the following equations:

QS= - 150+0.40P

QD = 600-0.2P

The production of H also creates marginal external costs of $165 per unit of H. Assuming that H is sold in

a competitive market, what is the market price? How many units of good H will be produced per year at

that price? What is the socially efficient output of H? Will taxing H @12.5 percent be socially optimal?

What alternate tax policy you can suggest to achieve social efficiency? Also calculate the incidence of each

of the taxes.