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Question: suppose the inverse demand for coal is estimated to be...

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Suppose the inverse demand for coal is estimated to be P = 100 - 0.15Q, where P is the price of coal and Q is the quantity demanded. Suppose coal mining produces an external marginal user cost. This cost equals $ 5 0 for each unit of production. Calculate and show graphically the socially efficient equilibrium price and quantity of coal.

The supply of coal is given by P = 0.1Q. Graph the efficient equilibrium and identify i) CS (ii) Scarcity rents: (iii) Quasi-rents: (iv) Total variable costs: (v) Social net benefits:

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