A chemical-producing firm is located just upstream from an electric power plant.Instead of the more expensive procedure of burying its wastes,the chemical-producing firm begins dumping its waste into the stream.This causes increased variable costs for the power plant,which uses water from the stream to cool its turbines.The chemical producer's dumping of waste into the stream causes

Question

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The chemical firm's dumping reduces its own costs by avoiding waste disposal expenses, lowering its marginal cost (MC). However, it increases the power plant's variable costs (e.g., cleaning or maintenance), raising its MC.

A Chemical-Producing Firm Is Located Just Upstream from an Electric