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Suppose a factory owner is permitted to pollute the environment without any restrictions, draw a picture...

Suppose a factory owner is permitted to pollute the environment without any restrictions, draw a picture of equilibrium that would emerge for the good they sell (if there was no government involvement in the market) as well as the socially optimal equilibrium (assuming that the position imposes an external cost).

a) put both equilibrium is on the same graph and label them both

b) label all curves

c) label all the DWL associated with the equilibrium
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Answer #1

There is negative externality caused by production f such a good which creates pollution In such cases, M se (Marginal Social

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