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Figure: Efficiency and Pollution
-(Figure: Efficiency and Pollution)Use Figure: Efficiency and Pollution.Assume that firms are the only beneficiaries of pollution and that costs are borne solely by others in the society.In the absence of government intervention,the marginal social cost of pollution will equal _____,and the marginal social benefit of pollution will equal _____.
A)$25;$5
B)$5;$25
C)$15;$15
D)$25;$0

Question

Use the following to answer question:
Figure: Efficiency and Pollution 
-(Figure: Efficiency and Pollution)Use Figure: Efficiency and Pollution.Assume that firms are the only beneficiaries of pollution and that costs are borne solely by others in the society.In the absence of government intervention,the marginal social cost of pollution will equal _____,and the marginal social benefit of pollution will equal _____.
A)$25;$5 
B)$5;$25 
C)$15;$15 
D)$25;$0

Quizplus · Accepted Answer

In the absence of government intervention, firms will pollute until their marginal benefit is zero, as they do not bear the social costs. Hence, the marginal social cost of pollution will be $25, and the marginal social benefit will be $0.

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