Why do polluting firms overproduce? Use a completely and correctly labeled graph to illustrate your answer.
What will be an ideal response?
An appropriate diagram should resemble Figure 15-2 from the textbook. As reviewed in the current chapter, polluting firms produce with a detrimental externality, and they do not pay the full social cost of production. With a lower price, they can move along the demand curve to a higher quantity demanded and will sell more. As indicated in Chapter 15, an externality will result in allocative inefficiency; the price of the last unit produced is less than the marginal social cost.
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Suppose you purchase a bond with a coupon of $50 for $1010. You sell it one year later for $900. What rate of return did you earn? Report a percentage with two decimal places
What will be an ideal response?
Which of the following is an advantage of fixing exchange rates?
A) limiting foreign exchange risk B) making residents more mobile across countries C) eliminating trade deficits D) making the prices of foreign goods more flexible in the domestic market