If a paper manufacturer does not bear the entire cost of the dioxin it emits,it will
A) emit a lower level of dioxin than is socially efficient.
B) emit a higher level of dioxin than is socially efficient.
C) emit an acceptable level of dioxin.
D) not emit any dioxin in an attempt to avoid paying the entire cost.

Question

Quizplus · Accepted Answer

If a paper manufacturer does not bear the entire cost of the dioxin it emits, it will emit a higher level of dioxin than is socially efficient. This is because when the manufacturer does not pay the full cost of emitting dioxin, they do not face the full consequences of their actions. As a result, they will continue to emit dioxin until the marginal cost of reducing emissions exceeds the cost savings of emitting at that level. This means that the manufacturer will emit more dioxin than is socially efficient, as the social cost includes both the private cost and the external cost of the emissions that the manufacturer does not pay for.

If a Paper Manufacturer Does Not Bear the Entire Cost