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The supply and demand for paper, in tons per year, is as follows:
Demand: Q = 200 - 4P
Supply: Q = -40 + 2P
a

#### The supply and demand for paper, in tons per year, is as follows:
Demand: Q = 200 - 4P
Supply: Q = -40 + 2P
a

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The supply and demand for paper, in tons per year, is as follows:

Demand: Q = 200 - 4P

Supply: Q = -40 + 2P

a. Find the equilibrium price and quantity.

b. Find the consumer and producer surplus at the equilibrium

c. Suppose each ton of paper produced generates a marginal external cost of $9

Find the socially optimal level of output of paper.

d. What tax per unit of paper would bring about the socially optimum level of output?

e. How much revenue would the corrective tax raise?

f. What is the net benefit to society of moving to the socially optimal level of output?

g. Draw a diagram showing the market equilibrium, the socially optimal level of output and shade the net benefit of moving to the optimal output level.