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Answer :
To provide the required columns in Excel:
(Pareto optimal allocation accounting for TEC):
In this column, calculate the quantity (Q) that maximizes the sum of consumer surplus and producer surplus while considering the marginal external cost (TEC). The formula to calculate the Pareto optimal allocation is:
Q = (√((200-0.2+3Q)/0.1)-200)/8
(TEC under the optimal allocation):
In this column, calculate the total external cost (TEC) by multiplying the quantity (Q) from Column 1 by the marginal external cost of $3. The formula is:
TEC = 3*Q
(Total wealth under the optimal allocation):
In this column, calculate the total wealth under the optimal allocation by adding consumer surplus, producer surplus, and TEC. The formula is:
Total wealth = (1/2)*(200-P)*(Q) + (1/2)*(P-0.2)*(Q) + TEC
(Optimal price under competitive equilibrium with no policy):
In this column, calculate the optimal price under competitive equilibrium with no policy by substituting the quantity (Q) into the demand function. The formula is:
Price = 200 - 8*Q
(Optimal quantity under competitive equilibrium with no policy):
In this column, calculate the optimal quantity under competitive equilibrium with no policy by equating the demand and supply functions. The formula is:
Q = (200 - 0.2)/8
By using these formulas in Excel, you can fill out each column to calculate the respective values.
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