1. An industry produces a good with marginal cost, MC=10+Q. Pollution from the production process generates the marginal external cost, MEC=.5*Q. The perfectly competitive market price is $40.a) If the industry only bases their production on the marginal cost, will they under produce, over produce, or produce the socially efficient quantity? (1pt)b) What quantity will be produced if the externalities are ignored? (1pt)c) What is the socially optimal quantity? (1pt)2. Are the following things common property resources, public goods, or neither? (1pt each)a) National defenseb) A public beachc) A restaurantd) Flood leveese) Sunlight3. Will a monopolist over produce or under produce or is it ambiguous when their good has:a) External costs? (1pt)b) External benefits? (1pt)
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