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This question was created from WA ECO10004 part B (1).pdf


1. Identify the negative externality discussed in the article? Explain, using a graph, how the
negative externality leads to an inefficient price and level of output. Provide two solutions that you would recommend to the government to address the externality? (4 marks) Word
count 350. Consider the example where Intel and AMD are a duopoly that produces CPU chips. Intel and AMD
can conduct R&D or they cannot conduct R&D. The table below shows the payoff matrix for the two firms. The numbers are millions of dollars of profit. Answer questions 2 and 3. Intel’s strategies
R&D No R&D R&D AMD’s
strategies No R&D

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As question 1 is provided in the image completely, i have solved the answer for question 1 only. Negative externality is... View the full answer

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perice -
6 .
. ST
MPC = Marginal private Cost
MSC = Marginal social Cost
MPB = Marginal private benefitid
MSC = MPC + Externality Costs.
which include
Cost of pollution due...

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