There is a demand for Road Salt. It helps melt the snow, but it creates a negative externality due to its impact on the water supply. As economists we consider this question according to the market that does not consider the negative externality and the market that considers the negative externality. You need to address both of these issues.

The Demand for Road Salt: P = 81 - 7Q_d

The Producer's Cost of Producing Road Sale is: TC_Production = 60Q

There is a competitive market for Road Salt, so P = MC

aWhat is the equilibrium price and quantity without regulation?

bWhat is the Consumer Surplus without regulation?

However, Road Salt creates a negative externality felt by all (it negatively impacts the water table and all taxpayers have to pay to repairwhether they want road salt or not).

The Negative External Cost of Using Road Salt is (hint: add this to the TC of production) TC_Destruction = 0.25Q²

cWhat is the price and quantity if we take into account the negative externality of using road salt?

dif we taxed road salt (this would account for regulation) to achieve the equilibrium in #2c, how much revenue would we generate?

eWhat is the consumer surplus with regulation?

fdraw the demand curve with equilibrium in both the regulated and non regulated case (use two different drawings and label them).

View Developer A&BbCCD AaBbCCDo Aabate A 1 Normal 1 No Spaci... Heading 1 Heading 2 Styl Yes, P=MCit should be P=60 because 60 is the Producer's cost To get the equilibrium of Price and Demand is: The demand for road salt is given by the following equation: P-81-70d where Od is the amount of road salt that consumers want to buy (quantity demanded), and P is the price of road salt. The supply for road salt is given by the following equation: P-60-70ds where Os is the amount of road salt that the producers supply (quantity supplied).Where supply equals demand or Qd=Qs. we can set the demand and supply equation equal to each other: Qd-Qs. P-81-70d=740d ; P= 60+70s = 670s 74-P-67+P Step1: Isolate the variable by adding 2P to both sides of the equation and subtracting 2 from both sides. 74-P-67+P 7-2P Step 2: Simplify the equation by dividing both sides by 2. 7/2-2P/2; 3.50=P taking the price of $3.50, and the demand equation, we get Qd =74-3.5 Od= 70.50 taking the price of $3.50, and the quantity supply equation, we get Os= 67+3.50 Os= 70.50 Now, if the price is $3.50 each, producers will supply 70.50. This means that we did our math correctly, since Qd=Q5 and both Od and Qs are equal to 70.50. That confirms that we've found the equilibrium quantity