SouthState Chemical Co produces pine oil cleaners in a process that produces emissions that discolor the paint on nearby houses, although the emissions have been declared nontoxic to humans
a. Is the price for the cleaner likely to be allocatively efficient? Use a graphic illustration in your answer.
b. If your answer to (a) is no, what is an appropriate government policy to correct the problem?
a. No, the price for the cleaner is too low; marginal social cost is greater than marginal private cost. The graphic illustration should resemble Figure 15-2 in the text.
b. The chemical company might be taxed to the extent of the damages sustained by homeowners to raise the marginal private cost to equal marginal social cost.
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If prices are sticky
A) prices will quickly adjust to changes in demand. B) economic activity will not be coordinated efficiently. C) quantity supplied will always equal quantity demand. D) economic activity will be coordinated efficiently.
Suppose a monopolist's marginal revenue equals marginal cost at an output of 100 . If price is $250, and average cost is $50 at this output, compute the monopolist's profit?
a. Profit = $250 b. Profit = $150 c. Profit = $15,000 d. Profit = $20,000