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Question 1 A cement company produces cement. The marginal cost of per bag cement is OMR 12 which is also the selling price. At this price, the comp bags of cement per year. The firm, however, produces smokes which costs the society OMR 2 per bag. But this cost is not reflected in the p external cost is taken into account for determining price, sales decline to 48,000 bags per year. At this level of supply, the producers' margi OMR 11 per bag. () Draw a graph and put the above information in the graph. [2 marks] (0) Identify the area of deadweight welfare loss and calculate the amount of loss [1 mark] (11) If government charges tax to correct externality, calculate the tax revenue per year mark] h Question 1 A cement company produces cement. The marginal cost of per bag cement is OMR 12 which is also the selling price. At this price, the comp bags of cement per year. The firm, however, produces smokes which costs the society OMR 2 per bag. But this cost is not reflected in the p external cost is taken into account for determining price, sales decline to 48,000 bags per year. At this level of supply, the producers' margi OMR 11 per bag. () Draw a graph and put the above information in the graph. [2 marks] (0) Identify the area of deadweight welfare loss and calculate the amount of loss [1 mark] (11) If government charges tax to correct externality, calculate the tax revenue per year mark] h

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