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Business, 18.05.2021 18:40 longboard5967

For the next three questions, consider a perfectly competitive pharmaceuticals manufacturer that charges $101 per pill produced and, considering private costs only, decides to produce 26,500 units. However, the production of the pill leads to pollution, which causes externality costs beyond private costs. If the firm produces the 26,500 units, marginal social cost (which includes private and social costs from the pollution externality) is $160. A government economist studies the situation and determines that, when the social cost of pollution is considered as well, 16,000 units should be produced instead of 26,500. Calculate the reduction in total spending that occurs when the government intervenes to force production of the socially optimal quantity. Carefully follow all numeric instructions. Although you are entering a reduction, enter a positive number only.

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