Problems
12. Consider the following diagram showing the monthly market
demand for electricity, where the electricity is generated by
burning coal. The mining, processing, and burning of coal have
considerable environmental and health costs associated that are
not reflected in the market price for the final product—electricity.
The diagram below shows the market demand for electricity and
private marginal costs of production.a. Current estimates for the full social cost of electricity
generated by burning coal vary greatly but suggest that it
could be many times higher than current market prices in
Canada and the United States. Supposing the external