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 best describes this situation?
A. The environmentally friendly firm will be operating at a lower 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, environmentally friendly producers will earn positive economic profits even without consumers paying them a higher price than standard producers.
D. Standard firms will have an incentive to shift their production to an environmentally friendly process.
Answer: B
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