If the market for a good is producing a negative externality in production (e.g. a polluting firm): (a) In market equilibrium, the marginal cost (MC) to society exceeds the marginal cost (MC) of production. b) In market equilibrium the marginal benefits to society exceed the marginal cost (MC) of production. (c) In market equilibrium the marginal costs (MC) to society exceed the total benefits to society d) In market equilibrium the private Cmg (MC) of production exceeds the Cmg (MC) for society. For each of the alternatives, explain which is correct and explain which are false or uncertain.
If the market for a good is producing a negative externality in production (e.g. a polluting firm): (a) In market equilibrium, the marginal cost (MC) to society exceeds the marginal cost (MC) of production. b) In market equilibrium the marginal benefits to society exceed the marginal cost (MC) of production. (c) In market equilibrium the marginal costs (MC) to society exceed the total benefits to society d) In market equilibrium the private Cmg (MC) of production exceeds the Cmg (MC) for society. For each of the alternatives, explain which is correct and explain which are false or uncertain.
Chapter14: Environmental Economics
Section: Chapter Questions
Problem 11SQ
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If the market for a good is producing a negative externality in production (e.g. a polluting firm):
(a) In
b) In market equilibrium the marginal benefits to society exceed the marginal cost (MC) of production.
(c) In market equilibrium the marginal costs (MC) to society exceed the total benefits to society
d) In market equilibrium the private Cmg (MC) of production exceeds the Cmg (MC) for society.
For each of the alternatives, explain which is correct and explain which are false or uncertain.
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