Answered: Explain why industrial pollution may…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Explain why industrial pollution may undermine the efficiency of competitive markets, defining the concepts of externality and deadweight loss as part of your answer. Identify the efficient allocation, the competitive equilibrium and the deadweight loss for a case in which the production of a quantity Q of an industrial product has MB = 100 - Q, private marginal cost MC = 20, and an external marginal cost MCE = 20 caused by pollution.

Definition Definition Degree to which financial markets incorporate all available information into the prices of assets. In a more efficient market, the prices reflect the available information more than that in a weak efficient market. It is difficult for investors to outperform the market in a strong efficient market. This is because all the available information is already discounted in the asset's price. However, in a weak-form efficiency, the market does not reflect all information in the asset's price. As a result, it becomes easier to generate better returns in a weak form or an inefficient market.

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