The following graph illustrates the situation in the dry cleaning market. The marginal social cost of the pollution rises as the quantity of items cleaned per week increases. In addition, there were two demand curves, one for a smaller city, DS, and the other for a larger city, DL.
1) Explain why the marginal social cost curve has a different slope than the marginal private cost curve.
2) What tax per item cleans will achieve economic efficiency in the smaller city? In the larger city? Explain why the efficient tax is different in the two cities.