Suppose The Dumpling House sells dumplings with total cost function:
TC = 2000 + 500Q+ 2Q^2
The market demand curve for dumplings is given by the equation:
Q = 1000 -0.5P
a) What is the Marginal Private Cost of The Dumpling House?
b) What is the market equilibrium?(price and quantity)
c) What is the consumer surplus and producer surplus at the market equilibrium?
d) Pork-Chive dumplings are delicious, but unfortunately their production generates a negative externality caused by deforestation and greenhouse gases.
If the externality cost is 4Q per unit produced, what is the Marginal Social Cost of the dumpling house?
(Assume they only make pork-chive dumplings)
e) What is the social optimal production level for dumplings?