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Question: The first two columns of the table show the demand schedule for electricity from a coal-burning utility; the second and third columns show the utility's cost of producing electricity. The marginal external cost of the pollution created equals the marginal cost.

      Price                             Quantity                    Total cost
(cents per kilowatt)          (kilowatts per day)       (cents per kilowatt)

        4                                  500                           10

        8                                  400                            8

       12                                 300                             6

       16                                 200                             4

       20                                 100                             2

With no government action to control pollution, what is the quantity of electricity produced, the price of electricity, and the marginal external cost of the pollution generated?

Microeconomics, Economics

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