Transcribed Image Text:Use figure 1, which illustrates the market for butane to answer the following three questions. Butane
has a private marginal cost of 10 + 5q but each gallon of butane also causes $30 of environmental
damage.
55
39
25
G
M
Social MC =
Private MC + 30.
T
5
10
15
Private MC 5+2Q
20
Inverse Demand = 90-3Q
25
30
Figure 1: Market for Butane
1. What areas depict the deadweight loss that would result from a perfectly competitive market
for butane with no environmental regulation imposed on producers.
has a private marginal cost of 10 + 5q but each gallon of butane also causes $30 of environmental
damage.
55
39
25
G
M
Social MC =
Private MC + 30.
T
5
10
15
Private MC 5+2Q
20
Inverse Demand = 90-3Q
25
30
Figure 1: Market for Butane
1. What areas depict the deadweight loss that would result from a perfectly competitive market
for butane with no environmental regulation imposed on producers.
