The following table shows teh marginal private cost (MPC and themargin

QUESTION

The following table shows teh marginal private cost (MPC and themarginal social cost (MSC) of a chemical factory.Tons ofChemicals MPC
1) The marginal cost of the factorys externality is $20 and isconstant.2) Since the market is perfectly competitive, the firm shouldproduce the quantity of units where MPC=MR. When MR equals130, the firm should produce 4 tons of chemicals. This isassuming it does not have to internalize the cost

es.3) When the firm does have to internalize the externalities,the firm should produce two tons of chemicals. Producinganymore will lead to a situation where MSC>MR, thus will lead toa loss for the firm.

ANSWER:

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