P D O Q Q (a) Kinked demand curve for an oligopolistic firm

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P D O Q Q (a) Kinked demand curve for an oligopolistic firm (b) Price stability due to kinked demand curve P MC2 a MC1 P1 P1 a D D = AR b O Q Q Q1 Q1 MR

Quantity of chemical produced α quantity of pollutant Price of chemical MSC MC P2 P1 Negative production externality 1)Animate P1 & Q1\\\\\\\\\\\\2)Animate MSC 3) & P2 Q2 \\\\\\\4)externality D = AR MR O Q2 Q1 Quantity of chemical produced α quantity of pollutant

Quantity of chemical produced α quantity of pollutant Perfect competition MSC Price of chemical MPC Social cost B A P2 D = AR C P1 1)Animate animate Q2 P2 with lines.2) triangle ABC 3) social cost D O Q2 Q1 Quantity of chemical produced α quantity of pollutant

Quantity of chemical produced α quantity of pollutant Price of chemical MSC MPC P2 P1 Tax = MSC – MPC B C D = AR MR O Q2 Q1 Quantity of chemical produced α quantity of pollutant

Merit good P O O MPC P3 P2 P1 MSB P0 DD = MPB Q1 Q2 F L K S Quantity of education

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