An environmental economic consulting firm is hired to measure the negative externalities associated with the pollution from an industry.The consultants calculate the marginal social cost of production to be MSC = 2Q+30 and the marginal private cost of production to be +30.The market demand curve for the industry can be expressed as P = 60-Q.What is the socially optimal level of output?

Question

An environmental economic consulting firm is hired to measure the negative externalities associated with the pollution from an industry.The consultants calculate the marginal social cost of production to be MSC = 2Q+30 and the marginal private cost of production to be  +30.The market demand curve for the industry can be expressed as P = 60-Q.What is the socially optimal level of output?

Quizplus · Accepted Answer

To find the socially optimal level of output, we need to equate the marginal social cost (MSC) with the market demand curve, which gives us:
P = MSC
60 - Q = 2Q + 30
Solving for Q, we get Q = 10.
Therefore, the socially optimal level of output is 10 units.

An Environmental Economic Consulting Firm Is Hired to Measure the Negative