(Figure 17

Essay

(Figure 17.13) According to the graph, MCP is the marginal cost of pollution, MAC is the marginal abatement cost, and the government's erroneous estimate of the marginal abatement cost is estimated MAC. Answer the following questions.
a. What is the socially optimal level of pollution?
b. If the government uses a quantity restriction, how much pollution will be emitted?
c. If the government uses a price-based restriction, how much pollution will be emitted?
d. What is the deadweight loss from the quantity restriction and from the price-based restriction?