Homework Answers
olution(s):
1) At equilibrium:
Marginal benefit = Marginal private cost
9 - Q = 2Q
9 = 3Q
Q = 3 units
2. Market price, P = 9 - 3 = $ 6
3. Social optimal:
Marginal benefit = Marginal social cost i.e. MPC + MEC
9 - Q = 2Q + Q
9 = 4Q
Q = 2.25 units
4. Social optimal price = 9 - 2.25 = $ 6.75
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