Exhibit 14-1 Private and social cost
The perfectly competitive profit-maximizing firm in Exhibit 14-1 creates water and air pollution as a consequence of producing its output of pigs. If pollution costs are borne by third parties, the firm will maximize economic profit by choosing to:
A. voluntarily incur costs to reduce its pollution.
B. produce at output rate Q3.
C. produce at output rate Q2.
D. produce at output rate Q4.
Answer: D
Economics
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