
Suppose that in the market for paper, demand is p = 100 - Q. The private marginal cost is MC
p = 10 + Q. Pollution generated during the production process creates external marginal harm equal to MC
e = Q. What is the total external harm at the competitive market level of output?
◦ 1350.5
◦ 1012.5
◦ 672.5
◦ 2025