we account only for private costs, and then when we account for social costs. How does accounting for the

externality affect the equilibrium price and quantity?

P

Qd Qs1 Qs2

$20 0

10

$18 1

9

8

7

$15 2.5 7.5 5.5

$12 4

$10 5

6

5

4

3

$5

7.5 2.5 0.5

TABLE 12.12

Access for free at openstax.org
43. A city currently emits 16 million gallons (MG) of raw sewage into a lake that is beside the city. Table 12.13

shows the total costs (TC) in thousands of dollars of cleaning up the sewage to different levels, together

with the total benefits (TB) of doing so. Benefits include environmental, recreational, health, and

industrial benefits.

12 • Problems 305

TC

TB

16 MG Current Current

12 MG 50

800

8 MG

150

1300

4 MG

500

1850

0 MG

1200

2000

TABLE 12.13

a. Using the information in Table 12.13, calculate the marginal costs and marginal benefits of reducing

sewage emissions for this city.

b. What is the optimal level of sewage for this city? How can you tell?
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