A long time ago in a galaxy far, far away…
After the fall of the Empire, the turmoil leads many formerImperial Stormtroopers to turn to deathsticks for relief.Deathsticks are a highly addictive drug that causes users tohallucinate. Given this information, in the deathstick market thereis likely a (negative/positive/no) externality in(consumption/production/either side of the market). This means themarginal social (benefit/cost) is greater than the marginal private(benefit/cost) in this particular market, and the equilibriumquantity is (the same/greater than/less than) the efficientquantity.
Having conquered the spice mines of Kessel, Jabba’s successorZiro the Hutt has taken control of the galaxy’s deathstick market.In other words, Ziro is the only producer of deathsticksin the galaxy. As Ziro notices that as he produces deathsticks, themarginal cost of deathstick production increases. Graph Ziro’s costcurves (ATC, AVC, MC), the price and/or marginalrevenue curve(s), and indicate the point where Ziro will produce.Be sure to show any deadweight loss or profit if anyexists.
