00:01
So here we have a question about externalities, right? we have the private marginal benefit is equal to 360 minus 4q.
00:08
We have the private marginal cost is equal to 6q, and we have the marginal damage is equal to 2q.
00:16
So together, i would say that the social marginal benefit or the social marginal cost is equal to the sum of these things, right? the total cost to society is the private cost plus the environmental damage.
00:31
So the social marginal cost would be 6q plus 2q is equal to 8q.
00:36
Let's visualize this.
00:38
It never hurts to visualize a problem in economics, cost and price.
00:44
So the private marginal benefit looks something like this, starts at 360, private marginal benefit.
00:52
The private marginal cost looks something like this, and the social marginal cost looks something like this.
01:00
So we want to get here, right? this is the optimal location.
01:05
So we wanna find that optimal, right? so let's find the optimum.
01:11
And the optimum is where the marginal benefit is equal to the social marginal cost, inclusive of the damages...