Market for Aluminum is represented by the following Demand: P=15−0

Market for Aluminum is represented by the following

Demand: P=15−0.3QP=15−0.3Q

Supply: P=4+0.5QP=4+0.5Q

A) Assume that the government has calculated that there is an external cost of 4$ because of the negative externality caused by the suppliers.

Calculate

1) Equilibrium Quantity when suppliers ignore the external cost and

2)Socially optimal quantity B)Continuing with an external cost of 2$, assume that the government imposes a corrective tax to internalize the externality.

3) What is the price that buyers pay

4) What is the price that the suppliers will get Again, use graphs when appropriate and show all work (including calculations)