A Negative Externality Problem

Demand for a good is given by Q = 100 - P. The private marginal cost of production is MCP = 10 + Q. There is a $10 per unit negative production externality in this situation.

-Refer to A Negative Externality Problem.Suppose there is no attempt to internalize the externality.Pigovian analysis indicates that the externality creates a deadweight loss equal to
A) $0
B) $25
C) $50
D) $100

Question

A Negative Externality Problem

Demand for a good is given by Q = 100 - P. The private marginal cost of production is MCP = 10 + Q. There is a $10 per unit negative production externality in this situation.

-Refer to A Negative Externality Problem.Suppose there is no attempt to internalize the externality.Pigovian analysis indicates that the externality creates a deadweight loss equal to
A) $0
B) $25
C) $50
D) $100

Quizplus · Accepted Answer

The Answer of A Negative Externality Problem

Demand for a good is given by Q = 100 - P. The private marginal cost of production is MCP = 10 + Q. There is a $10 per unit negative production externality in this situation.

-Refer to A Negative Externality Problem.Suppose there is no attempt to internalize the externality.Pigovian analysis indicates that the externality creates a deadweight loss equal to
A) $0
B) $25
C) $50
D) $100