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The graph below shows the marginal social cost (MSC), marginal private cost (MPC), marginal social benefit (MSB), demand (D), and marginal revenue (MR) curves for
The graph below shows the marginal social cost (MSC), marginal private cost (MPC), marginal social benefit (MSB), demand (D), and marginal revenue (MR) curves for a monopoly. PRICE MSC MPC P D = MSB Q1 22 230 25 26 QUANTITY MR (a) Identify the monopolist's (i) profit-maximizing quantity (ii) profit-maximizing price (b) What information in the graph indicates that there is a negative externality? (c) Identify the socially optimal quantity. (d) In the case in which the government imposes a per-unit tax equal to the marginal external cost, identify each of the following. (i) The dollar value of the tax, using the price labels from the graph (ii) The profit-maximizing quantity associated with the tax (e) Given the monopoly facing the negative externality, would the deadweight loss increase, decrease, or stay the same as a result of imposing the per-unit tax? Explain
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