The Black Ash Steel Company's plant belches large quantities of noxious fumes and black ash into the air. Residents in the surrounding area have higher medical bills because of Black Ash's pollution. If the firm is forced to pay the social costs of its production,

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If the firm is forced to pay the social costs of its production, it will have to bear the additional cost of reducing pollution. This will increase the cost of production, which will lead to a decrease in supply. To maintain profitability, the firm will have to charge a higher price for its steel to cover the additional cost. Therefore, the firm will produce less and charge more for its steel.

The Black Ash Steel Company's Plant Belches Large Quantities of Noxious