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Question: the inverse demand for leather is given by p ...

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The inverse demand for leather is given by P = 50-0.5Q. The industry supply of leather is determined by its marginal cost: MC = 0.4Q. Unfortunately, the production of leather causes noxious chemical residue to leach into groundwater supplies. The external marginal cost caused by these residues grows with the amount of output, and is measured as EMC = 0.05Q.

1A. How many leather is produced in the free market if the externality is not corrected.

B) What is the free market price of the leather if the externality is not corrected?

C) What is the social marginal cost?

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