Problem_Set_2-Spring2014_SOLN

Her supply curve is given by mc p q where q is the

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Unformatted text preview: . Her supply curve is given by MC = P = Q, where Q is the quantity supplied (in bushels) and P is the price. The market price is $24 per bushel. Unbeknownst to Erica, her neighborhood reeks of garlic due to her garden. Her neighbors are pleasant Milwaukeean’s and don't complain, though they suffer as a result of her garden. The marginal external costs are constant: MEC = 4. A) How much does Erica harvest in equilibrium? P = 24 = Q S B) What is the Social Marginal Cost curve? (give the equation) SMC = 4 + QS C) What is the socially-optimal amount of garlic produced by Er...
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This document was uploaded on 03/11/2014 for the course ECON 328 at Wisconsin Milwaukee.

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