2. Assume the supply and demand for paper is given by the following: Demand: P =1500 – 0.1Q Private-cost supply: P = 100 + 0.1Q Marginal external cost: $200 Social-cost supply: P = 300 + 0.1Q a. Solve for equilibrium P, Q, and total gross gains from trade assuming no regulation (use private-cost supply) b. Solve for total external cost under #1 above c. Solve for the true or net gains from trade under #1 above (total gross gains from trade – total external cost)

2. Assume the supply and demand for paper is given by the following: Demand: P =1500 – 0.1Q Private-cost supply: P = 100 + 0.1Q Marginal external cost: $200 Social-cost supply: P = 300 + 0.1Q a. Solve for equilibrium P, Q, and total gross gains from trade assuming no regulation (use private-cost supply) b. Solve for total external cost under #1 above c. Solve for the true or net gains from trade under #1 above (total gross gains from trade – total external cost)

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter8: Market Failure

Section: Chapter Questions

Problem 2P: Draw a standard supply and demand diagram for televisions, and indicate the equilibrium price and...

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