Question

The external cost is \$ 225 per ton thus the social cost would be less than the equilibrium quantity.

Q Price Private + External cost = Social Cost
1 1350 150 + 225 = 375
2 1050 300 + 225 = 525
3 750 525 + 225 = 750
4 450 675 + 225 = 900
5 300 825 + 225 = 1050
6 225 975 + 225 = 1200

The market equilibrium quantity is 3.5 tons of paper. Socially efficient paper production = 3 tons of paper.

To create an incentive for the firm to produce the socially optimal quantity of paper, the government could impose a tax of \$ 225 paper per ton.

I am really sorry I don't have access to the graphing tool thus I have constructed it manually please accept it it would be great help to me.

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