the effect of negative externalities on optimal quanity of consumption

3. The effect of negative externalities on the optimal quantity of consumption Consider the market for paper. Suppose that a paper factory dumps toxic waste into a nearby river, creating a negative externality for those living downstream from the factory. Producing an additionat ton of paper imposes a constant external cost of $70 per ton. The following graph shows the demand (private value) curve and the supply (private cost) curve for paper, Use the purple points (diamond symbol) to plot the social cost curve when the external cost is $70 per ton Homework (Ch 10) Use the purple points (diamond symbol) to plot the social cost curve when the external cost is $70 per ton. 200 180 Social Cost 100 140 Supply (Private Cost) 120 PRICE (Dollars per ton of paper) 100 80 00 O 40 Demand (Private Value) 20 0 0 4 2 3 5 QUANTITY (Tons of paper) 1.5 120 Supply (Private Cost) 2 100 PRICE (Dollars per ton of pa 00 2.5 30 3 40 3.5 20 Demand (Private Value) 4 4.5 0 1 5 6 2 3 QUANTITY paper) 5 5.5 The market equilibrium quantity is tons of paper, but the socially optimal quantity of paper production is tons per ton To create an incentive for them to produce the socially optimal quantity of paper, the government could impose of paper Scou Homework (Ch 10) Supply (vival Cos 1.5 2 100 PRICE (Dollars per ton of 60 25 00 3 0 3.5 Demand Private Value) 20 4 o 4.5 5 QUANTITY (Tons of paper) 5 5.5 tons tons of paper, but the socially optimal quantity of paper production is The market equilibrium quantity is ors per to To create an incentive for the firm to produce the socially optimal quantity of paper, the government could impose a (Private Value) 3 QUANTITY (Tons of paper) The market equilibrium quantity tax tons of paper, but the socially optimal quantity of paper production is subsidy To create an incentive for them to produce the socially optimal quantity of paper, the government could impose of paper perion