Use the answers given below to answer the question at the ve

Use the answers given below to answer the question at the very end:

Answer: 97,768,000

Answer: 59,062,500

Answer: It is higher at the socially optimal outcome.

QUESTION:

How would you respond to critics of China’s efforts to reduce pollution, in particular, those who complain of the costs of regulation? What economic arguments are there in support of or in response to these critics?

Suppose China wishes to reduce the amount of air pollution generated by electrical plants. The marginal benefit of electricity is P 464,000 - 200Q and the producers\' marginal cost is P-32,000+70Q. The air pollution presents a negative externality and the marginal external cost of each unit is P 756Q

Solution

I would respond by usin the numbers provided above. If we see the total cost at market equilibrium it is much more than that of the socially optimal equilibrium. Which says that there is is a serous need to cut the cost by following the socially optimal equilibrium, where p=mc.

If we see from producers point of view, he wants more of producer surplus which will be avaliable by going for socially optimal equlibrium. (solution 3). overall its a win win situation, hence going for socially optimal equlibrium is better.