Consider a profit maximizing firm whose total cost function is given as TC=Q2 +
20Q, consumers of the firm’s products derive benefits from the good according to the
function MB=500 – 12Q. Production of the product has negative effects on the
environment approximated at Ksh. 300 per unit.
(i) Determine the efficient level of output for the firm without government intervention
Finding Q with the social cost of 300
"MSB= MSC"
"500-12Q = 300"
"12Q=200"
"Q = \\frac{200}{12}"
"Q= 16.67"
This is the efficient output without government intervention
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