Problem
Consider an industry with demand q = 120 - 3p and supply q = 2p - 10. Suppose that production is polluting the environment and that the marginal social cost of production is given by MSC(q) = 1/2 q^2.
(a) What is the level of production in the market equilibrium?
(b) What is the socially optimal level of production?
(c) Determine the Pigou tax that achieves the social optimum.
The response should include a reference list. Double-space, using Times New Roman 12 pnt font, one-inch margins, and APA style of writing and citations.