The second drop down menu on the first sentence the options are the exact same o
ID: 1161406 • Letter: T
Question
The second drop down menu on the first sentence the options are the exact same options as the one from the first drop down menu I expanded. The thir drop down menu the two pointions are 1) subsidy 3. The effect of negative externalities on the optimal quantity of consumption Conaider the market for steel. Suppose that a steel manufacturing plant dumps toxic waste into a nearby river, creating a negative externality for those living downstream from the plant. Producing an aditional ton of steel imposes a constant external cost of $220 per ton. The following graph shows the demand (private value) curve and the supply (private cost) curve for steelExplanation / Answer
Market equilibrium quantity is 4.5
Shift the supply curve abive by $220 for each quantity for getting the social supply curve.
Thus new social supply curve will intersect the demamd curve at 3.5tons=Socially optimal output.
In case to get socially optimal output, government should tax the firm.