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The lakes and rivers of the Greenbarrow National Forest have become so polluted, due to emissions by several upstream power plants, that the fish catch

The lakes and rivers of the Greenbarrow National Forest have become so polluted, due to emissions by several upstream power plants, that the fish catch has plummeted by half. As a result, the number of visitors to the region has also plummeted, harming the local economy. A team of experts estimates the marginal social cost of the power plants production activities at $20 per megawatt hour of electricity produced. a. The graph below presents the unregulated market for electricity in the Greenbarrow National Forest area. Shift the appropriate curve to reflect the true marginal cost of electricity generation by the upstream power plants, and shade the area representing the deadweight loss that arises from these activities. Then, calculate the deadweight loss associated with electricity generation by the power plants.

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120 110 Deadweight loss Supply 100 90 80 Price ($ per megawatt hour) 70 60 50 Demand 40 30 20 0 1 2 3 4 5 6 7 8 9 10 Quantity of electricity (millions of megawatt hours)

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