EBK ECONOMICS FOR TODAY
EBK ECONOMICS FOR TODAY
9th Edition
ISBN: 8220101414250
Author: Tucker
Publisher: Cengage Learning US
Question
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Chapter 14, Problem 1SQP
To determine

To compare price and quantity in a competitive industry and green industry.

Expert Solution & Answer
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Explanation of Solution

When a competitive industry sells pollution generating product, the price of the product will be lower and the quantity produced will be larger than the green industry. Externality cost incurred by the negative externality of the product is not included in the price of the product in the competitive industry. This implies that the price charged is lower than the actual cost and a lower price results in a higher quantity demanded of the product. However, the green industry includes the externality cost for pricing, and hence the price charged will be higher.

Economics Concept Introduction

Externality: Externality is the benefit or cost that affects someone who is not directly involved in the production or consumption of a good or service.

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