Consider the following model for the production of refined oil: MSC = 10 + 0.5Q; MEC = 0.3Q;
MSB = 30 - 0.3Q; MEB = 0. Use these relationships to answer any or all of Questions.
-Based on the model, the price at the efficient equilibrium is

Question

Quizplus · Accepted Answer

The efficient equilibrium is found where MSC (Marginal Social Cost) equals MSB (Marginal Social Benefit). MSC = 10 + 0.5Q and MSB = 30 - 0.3Q. Setting MSC equal to MSB gives 10 + 0.5Q = 30 - 0.3Q, solving for Q gives Q = 25. Substituting Q = 25 into MSC or MSB to find the price gives P = 10 + 0.5(25) = $22.50.

Consider the Following Model for the Production of Refined Oil