Essay
Mr. Barnes operates a power plant in the local market. Mr. Barnes' marginal cost function is: MC(q) = 2 + 0.1q. Mr. Barnes can sell all the output he produces for $9 per unit. In generating power, Mr. Barnes also emits pollution that causes damage to the local community. The marginal external cost of his production is: MEC(q) = 0.05q. What level of output will Mr. Barnes choose to maximize profits? Is this level of production efficient? If not, what could the local community do to ensure efficiency?
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To maximize profits, Mr. Barnes sets: P ...View Answer
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