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# the socially efficient price, units of output and profits

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The marginal cost of producing coal for a company is MC = 5Q, while the marginal cost of pollution is MC = 3Q. The demand for coal is given by Q = 25 &#61485; .25P. The firm's total revenue is price time's quantity (or units of output), and total profit (or loss) equal total revenue less total cost. Based on that information, answer the following questions.

A. What is the socially efficient price, units of output and profits?
B. A perfectly competitive firm would produce what output? What is the price and profits of this firm?
C. How much output would a monopoly produce? What is the price and profits of the monopolist?
D. What do you conclude about the price, units of output, and profits with respect to the firms in 3.A., B., and C.?
E. If the federal government taxed output at \$2 per unit, what quantity would a perfectly competitive firm produce? What is the price? What are the economic profits?

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#### Solution Summary

Determine the socially efficient price, units of output and profits, etc.

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