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Homework answers / question archive / 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

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

Marketing

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.

a. What is the equilibrium price and quantity when only private costs are taken into account? Explain your reasoning.

b. What is the equilibrium price and quantity when social costs are taken into account? Explain your reasoning.

 

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

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