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The production of steel causes air pollution. Assume that the damage done by this pollution can be quantified as $75 per ton of steel produced.

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The production of steel causes air pollution. Assume that the damage done by this pollution can be quantified as $75 per ton of steel produced. The figure below shows the marginal private benefit and the marginal private cost of steel. (i Price $600 Tools $550 .. $500 DWL $450 MCsocial MC put $400 $350 $300 $250 $200 $150 MB pyt=MB social $100 $50 0 110 120 130 140 Tons of steel (millions)a. Draw the marginal social cost of steel on the graph. Instructions: Use the tool provided 'MCsocial' and plot only the two endpoints across the range of output (0-120). b. The efficient quantity is million tons. The market outcome is million tons too high c. Draw the deadweight loss that arises if the government does not intervene in this market. Instructions: Use the tool provided 'DWL' to illustrate this area on the graph. Drag the points to move or resize. d. A Pigouvian tax of $ per ton would eliminate the deadweight loss

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