Which of the following statements concerning pollution is correct?
A) Economic efficiency requires that pollution be completely eliminated.
B) Economic efficiency dictates that the optimal amount of pollution arises at the point at which price equals private marginal cost.
C) Pollution should be reduced to the point at which the marginal benefit from further reduction equals the marginal cost of further reduction.
D) Pollution should be reduced to the extent necessary to return production to the production possibilities frontier.
Answer: C
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The Granger Cases of the 1870s
(a) sealed the fate of the U.S. railroad system, even though the cases were covered under a case involving a grain elevator. (b) came before the U.S. Supreme Court because state legislatures had passed laws in the 1870s to allow state agencies to control various aspects of railroad operation, including rate setting; these laws were then challenged by railroad companies. (c) established the principle that railroads were unquestionably subject to permanent regulation. (d) are true for all of the above.
If a permanent drop in demand causes a monopolist to earn below-normal profits in the long run, this monopolist
a. will always exit the market in the long run b. will be forced by the government to continue operating in the long run c. may continue operating in order to avoid alienating its customers d. will exit the market in the long run only if it cannot cover its fixed costs e. will use limit pricing to reduce the size of its loss