Suppose that supply for electricity market is given by P = 5 + 2Q, and demand is given by P = 85 2Q. However, production of electricity pollutes the…

Suppose that supply for electricity market is given by P = 5 + 2Q, and demand is given by

P = 85 − 2Q. However, production of electricity pollutes the environment. As a result the

marginal social cost of the production increased and is given by P = 5 + 3Q. The socially

optimal output in this market is

Continue with previous question (electricity market), in order to maintain the socially optimal

outcome, government needs to use

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