Looking for someone who can respond to the following question below. Responses to the questions should be based on the scenario given.
Consider an industry that creates pollution. Demand for the product is given as P = 150 – 2Q. Supply (considering just private costs) is P=Q. Suppose that production creates a marginal external cost of MEC = Q additionally.
a. What is the unregulated equilibrium value of production?
b. What is consumer surplus and producer surplus in the unregulated market?
c. What is the deadweight loss from unregulated production?
d. What is the socially optimal level of production?
e. Explain why a "free market" fails in this case.
f. Suppose a tax were imposed of T=$8, what would then be the deadweight loss?
g. Is there some level of tax that would eliminate the deadweight loss? What value?
h. Suppose that there is an unregulated fringe market, that can produce additional output at a price of $60 (there may be a variety of reasons for the lack of regulation, such as point vs nonpoint air pollution sources). What is the deadweight loss of the tax from the previous question?