When farmers raise hogs,there are a number of external costs.In particular,hogs generate methane gas.Without government regulation:
A)too few hogs will be raised.
B)the price of hogs will be less than the marginal social cost of the last hog sold.
C)the price of hogs will be less than the marginal benefit of the last hog sold.
D)the price of hogs will be less than the marginal cost of the last hog sold to the hog farmer who sold it.

Question

Quizplus · Accepted Answer

Without government regulation, the hog farmer does not take into account the cost of the methane gas generated by the hogs. This means that the price of hogs will be less than the marginal social cost of the last hog sold, since the external cost of the methane gas is not taken into account. Therefore, the marginal private cost to the hog farmer will be less than the marginal social cost, leading to an overproduction of hogs.

When Farmers Raise Hogs,there Are a Number of External Costs