The supply and demand for paper, in tons per year, is as follows:
Demand: P = 50 - .25Q
Supply: P = 20 + .5Q
Each ton of paper produced generates a marginal damage of $6
a. Find the equilibrium price and quantity.
b. Find the consumer and producer surplus at the equilibrium
c. Find the socially optimal level of output of paper.
d. How can a corrective tax bring about this equilibrium?
e. How much revenue would the corrective tax raise?
f. What is the net benefit to society of moving to the socially optimal level of output?