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The supply and demand conditions facing a firm that makes widgets and generates a negative externality by dumping a highly toxic sludge in a nearby
The supply and demand conditions facing a firm that makes widgets and generates a negative externality by dumping a highly toxic sludge in a nearby river is given in the table below.
Price | Quantity Demanded | Quantity Supplied without Paying Social Costs | Quantity Supplied after Paying Social Costs |
100 | 0 | 120 | 75 |
80 | 10 | 100 | 50 |
55 | 30 | 90 | 30 |
40 | 55 | 85 | 25 |
30 | 80 | 80 | 20 |
20 | 100 | 65 | 15 |
The equilibrium price and quantity when only private costs are taken into account are
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