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The effect of negative externalities on the optimal quantity of consumption Consider the market for pharmaceuticals. Suppose that a pharmaceutical factory dumps toxic waste into
The effect of negative externalities on the optimal quantity of consumption
Consider the market for pharmaceuticals. Suppose that a pharmaceutical factory dumps toxic waste into a nearby river, creating a negative externality for those living downstream from the factory. Producing additional pharmaceuticals imposes a constant perunit external cost of $ The following graph shows the demand private value curve and the supply private cost curve for pharmaceuticals.
Use the purple points diamond symbol to plot the social cost curve when the external cost is $ per unit.
The market equilibrium quantity is units of pharmaceuticals, but the socially optimal quantity of pharmaceuticals production is
units.
To create an incentive for the firm to produce the socially optimal quantity of pharmaceuticals, the government could impose a of
per unit of pharmaceuticals. Please provide a graph and answers to the question
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