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The following table shows the private value, private cost, and external cost for various quantities of output in a market.

a) What is the competitive equilibrium (PP and QQ) in this market (i.e. the equilibrium) with no government intervention?

b) What is the socially optimal equilibrium (PP and QQ)?

pur-new-sol

Quantity	Private value	Private cost	External cost	Social cost = Private cost + External cost
1	$14	$10	$2	$12
2	13	11	2	$13
3	12	12	2	$14
4	11	13	2	$15
5	10	14	2	$16
6	9	15	2	$17
7	8	16	2	$18

a) The competitive equilibrium price and quantity is where Private value = Private cost. From the table it is seen that P = $12 and Q = 3.

b) The socially optimal equilibrium price and quantity is where Private value = Social cost. From the table it is seen that P = $13 and Q = 2.

Related Questions

Quantity	Private value	Private cost	External cost	Social cost = Private cost + External cost
1	$14	$10	$2	$12
2	13	11	2	$13
3	12	12	2	$14
4	11	13	2	$15
5	10	14	2	$16
6	9	15	2	$17
7	8	16	2	$18

Quantity	Private value	Private cost	External cost	Social cost = Private cost + External cost
1	$14	$10	$2	$12
2	13	11	2	$13
3	12	12	2	$14
4	11	13	2	$15
5	10	14	2	$16
6	9	15	2	$17
7	8	16	2	$18

Quantity	Private value	Private cost	External cost	Social cost = Private cost + External cost
1	$14	$10	$2	$12
2	13	11	2	$13
3	12	12	2	$14
4	11	13	2	$15
5	10	14	2	$16
6	9	15	2	$17
7	8	16	2	$18