Problem
External Costs with Fixed-Production Technology Review the situation illustrated in Exhibit 1 in this chapter. If the government sets the price of electricity at the socially optimal level, why is the net gain equal to triangle abc, even though consumers now pay a higher price for electricity? What would the net gain be if the government set the price above the optimal level?
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.