Suppose that in a perfetly competitive market, the demand curve is given by P=100-Q, the supply curve is given by P=Q, and that the social demand curve is given by P=80-Q.

1) In a single graph, represent the demand curve, as well as the supply and social demand curves. Solve for both the equilibrium and the efficient equilibrium.

2) Which type of externality does this represent? Give real life situations that fit this type of externality.

3) What could the government do to correct this externality?