A paper mill discharges chemicals into a river which pollutes the shores of a downstream resort area. The private marginal cost, social marginal cost, and marginal benefit associated with the production of paper are given by the following equations:
MCP = 5 + Q
MCS = 10 + 2Q
MB = 35 - 0.5Q
The marginal social cost at the competitive free-market equilibrium is
◦ 25.
◦ 10.
◦ 5.
◦ 20.
◦ 50.