The demand for a product is given by Q = 1200 - 4P , and supply is Q = 2P - 240. Assume that the consumption of this product would impose a $12 per unit marginal damage to other people.
(a) How many more units of this product will the free market produce than is socially optimal?
(b) What is the deadweight loss associated with the externality?
(c) Show on a graph the demand and supply of this good, the social marginal benefit (SMB) and social marginal cost (SMC) due to the marginal damage, and the deadweight loss.
Show the detail of your computation.