Suppose that in the market for paper, demand is p = 100 - Q. The private marginal cost is MCp = 10 + Q. Pollution generated during the production process creates external marginal harm equal to MCe = Q. What is the total external harm at the competitive market level of output?

In the above figure, the deadweight loss due to the tax is

A) $1,000. B) $2,000. C) $4,000. D) $8,000.

If some firms internalize their external costs by being a cleaner and more "environmentally friendly" producers than other firms that do not, then which of the following offers the best and most complete description of this situation?

a. The environmentally friendly firm will be operating at a higher marginal and average cost than those firms that shift some costs to society in the form of external costs. b. In a long-run competitive equilibrium in which consumers do not distinguish between environmentally friendly and standard producers, the environmentally producers will receive negative economic profits and be forced to change or exit. c. Without regulations requiring firms to internalize their external costs, producers can only afford to be environmentally friendly if consumers reward them with a price premium. d. None of the above is correct.