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The demand and supply functions of a product is given as P = 200 - 0.5Q and P = 100 + 0.5Q, respectively. Solve for
The demand and supply functions of a product is given as P = 200 - 0.5Q and P = 100 + 0.5Q, respectively. Solve for the equilibrium price and quantity in the product market. If the product has an external benefit of $20, analyse the market and determine the social optimal quantity. Compute the deadweight loss if the market operates at its equilibrium level. Support your answers with a suitable market diagram. What can the government do to restore efficiency in the product market?
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