The external marginal cost of producing coal is MC_external = 8Q while the internal marginal cost is MC _internal = 6Q. The inverse demand for coal is given by P = 180 4Q. What is the socially efficient level of output?

(a) What is the socially efficient level of output? Please show your calculations.

(b) Given these costs and market demand, how much output would a monopolist produce in the

absence of any government action to require the socially efficient outcome? Please

show your calculations.

(c) Discuss any action the government might take to induce firms in this industry to

produce the socially efficient level of output.