The supply of A4 paper per week by ABCprints Industries Ltd, a public-private venture that manufactures paper products is described by the following equation; MPC=20+2Q
Where MPC is the Marginal Private Cost (MPC) of pollution associated with A4 paper production. The demand for the product is described by: MPB=300-Q Where MPB is the Marginal Private associated with price per bundle of A4 paper. The Marginal External Cost (MEC) of pollution caused by paper production is measured as: MEC = 40+5Q
(a) Assume that the A4 paper is sold in a competitive market, what is the market price of a bundle of A4 paper? What quantity of A4 paper will be produced weekly at the competitive market price. (b) Find the efficient weekly output of A4 paper and how much should be charged per unit of output? (c) What is the loss in consumer surplus associated with the movement from the competitive equilibrium to the efficient level of output?