If the production of a good causes pollution (an external cost) is the unregulated competitive market equilibrium of that product efficient?
What will be an ideal response?
The presence of pollution means that the supply curve of the firm, which is also the firm's marginal cost curve, only represents the firm's private costs and ignores all external costs. The equilibrium between supply and demand curves leads to overproduction of this good. The amount produced, therefore, is not efficient because the level of production occurs where the marginal private cost equals the marginal social benefit rather than where the marginal social cost equals the marginal social benefit.
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Refer to Figure 2-9. Carlos Vanya grows tomatoes and strawberries on his land. His land is equally suited for growing either fruit. Which of the graphs in Figure 2-3 represents his production possibilities frontier?
A) Graph A B) Graph B C) Graph C D) either Graph A or Graph B E) either Graph B or Graph C
The demand for tobacco is price inelastic. Suppose there is a drought that destroys a large portion of the tobacco crop
What will happen in the market for tobacco? Will the equilibrium price and quantity change? If so, how? What will happen to the total revenue earned by tobacco farmers?
Voluntary free trade results in:
a. population growth. b. inflation. c. higher living standards. d. income disparity. e. unemployment.
The federal funds rate is the short-term interest rate that banks charge one another for loans.
Answer the following statement true (T) or false (F)