Question

You are an industry You are an industry analyst that specializes in an industry where the market inverse demand is P = 200 - 5Q. The external marginal cost of producing the product is MCExternal = 10Q, and the internal cost is MCInternal = 16Q." that specializes in an industry where the market inverse demand is P = 200 - 5Q. The external marginal cost of producing the product is "

Answer 1

An internal marginal cost is the extra cost of producing one more unit of output.

An internal marginal cost is the extra cost to society after one more unit of output is produced. It is also known as externality.

And the social marginal cost is the sum of internal and external marginal costs.

For this question:

The external marginal cost of producing the product is $10Q, which is given by the question.

And the social marginal cost is:

MCSocial = MCexternal + MCinternal

MCSocial = 10Q + 16Q

MCSocial = 26Q