The external marginal cost of producing coal is MC_external = 8Q while the internal marginal cost is MC _internal = 6Q.The inverse demand for coal is given by P = 180 − 4Q.If the government taxed output at $2 per unit,what would a competitive industry produce? A) 10 B) 20 C) 15 D) 18

Question

Quizplus · Accepted Answer

To find the competitive quantity, we need to find the intersection of the industry supply and demand curves.

Industry supply = MC + tax = 6Q + 2Q = 8Q

Setting industry supply equal to demand:

8Q = 180 - 4Q

Solving for Q, we get

Q = 15

Therefore, the competitive quantity is 15 units.

The External Marginal Cost of Producing Coal Is MCexternal =

The External Marginal Cost of Producing Coal Is MC_external =