The Following Table Shows the Marginal Private Cost (MPC) and the Marginal

question 24

Essay

The following table shows the marginal private cost (MPC) and the marginal social cost (MSC) of a chemical factory.
$$\begin{array}{l}\text { Tons af }\\\begin{array} { l l l } \text { Chenicals } & \text { MPC } & \text { MSC } \\\hline 1 & 100 & 120 \\2 & 110 & 130 \\3 & 120 & 140 \\4 & 130 & 150 \\5 & 140 & 160\end{array}\end{array}$$ Answer the following questions:
(1) What is the marginal cost of the factory's externality? Is it constant at all quantities?
(2) If the factory is a perfectly competitive firm and is not required by the government to internalize its external cost, how many tons should the factory produce, given that the market price of a ton of chemicals is $130?
(3) If the factory is a perfectly competitive firm and is required by the government to internalize its external cost, how many tons should the factory produce, given that the market price of a ton of chemicals is $130?
(4) Draw a graph illustrating your answers.

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Definitions:

Financial Statements

Formal records that outline the financial activities and condition of a business, including the income statement, balance sheet, and statement of cash flows.

Closing Entries

Journal entries made at the end of an accounting period to transfer temporary account balances to permanent accounts, preparing the books for the next period.

Adjusting Entries

Journal entries made in accounting at the end of an accounting period to allocate income and expenditures to the period in which they actually occurred.

Unadjusted Trial Balance

A listing of all accounts in the general ledger with their balances before any adjustments are made for the end of the accounting period.