where the market demand function for a good is given as P = 80 - q, and the marginal cost (in dollars) of producing as MC = 1q, suppose now that the process of producing the good creates external damages in the amount MEC = $10 per unit of output.

a. Derive the equation of the marginal social cost (SMC) curve.

b. Graph MB, MPC, MSC curves on a diagram.

c. i. Find the equilibrium price and quantity produced. Show the quantities on your diagram.

ii. Compute the consumer surplus and producer surplus at the free market equilibrium.

iii. Calculate the cost of the externality at the free market equilibrium.

iv. What are the overall social benefits in the market?

What is the efficient quantity of the good? Show the quantity on your diagram.

e. At the efficient quantity you computed in (d),

i. calculate the overall social benefits in the market. Shade the area that denotes social benefits on your diagram above. ii. calculate the dollar value of pollution damage.