Determine socially efficient level of output/ Managerial Economics
Assume the external marginal cost of pollution is MCext=5Q and internal marginal cost is MCint=10Q. Further, suppose the inverse demand for the product, Q, is given by P = 90-Q .
a. What is the socially efficient level of output?
b. How much output would a competitive industry produce?
c. How much output would a monopoly produce?
d. Discuss three ways government can induce firms to produce the socially efficient level of output.