mtmissycat1248 mtmissycat1248

05-06-2023
Business

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Black Smoke eatery is the only restaurant in a small town.
The face inverse demand of p = 25 − 0.05q and have costs TC(q) = 3 + 4q. Unfortunately, the eatery produces a lot of unsightly black smoke at the same rate as output (so pollution is equal to q).
1. Find the unregulated equilibrium.
2. Assume that the external cost of Black Smoke’s pollution is EC = 2q. Find the social optimum.
3. If the regulator is to seek the socially optimal output, what pollution quota would she set?
4. If the regulator is to seek the socially optimal output, what emission fee would she set?

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