The supply of paper is described by the following equation: Q_s = 5,000P where Q_s is tons supplied per year and P is the price per ton. The demand is described by Q_D = 400,000 - 1,000P where Q_D is tons demanded per year. Because of the pollution associated with paper production, marginal external costs of $20 are associated with each ton of paper. Assuming that paper is sold in a competitive market, what is the market price? How many tons of paper will be produced per year at that price? What is the efficient annual output of paper? How can a corrective tax achieve efficiency? The following data show how the marginal external benefit and marginal private benefit associated with a soil treatment agent to control Japanese beetles vary with the gallons of the control agent sold per year: Draw the demand curve for the control agent and show how the marginal private benefit differs from the marginal social benefit. Suppose the supply of the agent is infinitely elastic at the current price of $25 per gallon. Will the market equilibrium be efficient? How would your answer differ if the market supply were infinitely elastic at a price of $15 per gallon? What policies could you suggest to achieve efficiency? The EPA wants to reduce emissions of sulfur dioxides from electric power-generating plants by 20 percent during the next year. To achieve this goal, the EPA will require each power-generating plant in the nation to reduce emissions by 100 tons per year. Suppose five power plants emit sulfur dioxides and serve a given metropolitan area. The following table shows the cost per ton of reducing emissions for each of the five plants