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The demand of a product is given by: P = 200 - 4Q. The supply of the product is given by: P = 20 +
The demand of a product is given by: P = 200 - 4Q. The supply of the product is given by: P = 20 + 2Q. The production process creates pollution that costs $30 to the society for each unit being produced. (1) (5 points) Which type of externality describes the above situation? (2) (5 points) What is the consumer surplus, producer surplus, externality, and net benefit at market equilibrium? (3) (5 points) What is the net benefit at social optimum and the deadweight loss due to this externality?
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