If firms in a perfectly competitive industry pollute the air and there is no government regulation or intervention in the market, then compared to the socially optimal levels, OA. the market price will be too high and industry output too low. B. the market price will be too low and industry output too high. OC. the market price and industry output will be at the socially optimal levels. D. we do not have enough information to determine which of these is true.
If firms in a perfectly competitive industry pollute the air and there is no government regulation or intervention in the market, then compared to the socially optimal levels, OA. the market price will be too high and industry output too low. B. the market price will be too low and industry output too high. OC. the market price and industry output will be at the socially optimal levels. D. we do not have enough information to determine which of these is true.
Microeconomics: Private and Public Choice (MindTap Course List)
16th Edition
ISBN:9781305506893
Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Chapter2: Some Tools Of The Economist
Section: Chapter Questions
Problem 9CQ
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Step 1: Identify the Market Structure and Externalities
VIEWStep 2: Understand the Concept of Socially Optimal Output
VIEWStep 3: Examine the Effect of Externalities on Market Price and Output
VIEWStep 4: Determine the Market Outcome Relative to the Social Optimum
VIEWStep 5: Conclude with the Impact on Social Welfare
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