Suppose the following equations have been esti- mated for the market for hazardous waste services:
MSB = 30 - 2.5Q MPC = 1.1 + 0.9Q
MSC = 1.5 + 1.25Q
where Q is thousands of tons per week, and the dollar values are per ton. Assume there are no consumption externalities in this market.
a. State the equation that represents the negative externality in this market.
b. Algebraically solve for the competitive and socially optimal price and quantity combinations. Quantify the extent of the resource misallocation associated with the competitive solution.
c. Find the dollar value of a waste-end charge that would restore efficiency to this market.