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.From society's viewpoint,the chemical producer's pollution causes an

Question

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The pollution increases the costs for the power plant, leading to a decrease in its production. Meanwhile, the chemical producer faces lower costs by dumping waste, potentially leading to overproduction. This misallocation of resources results in societal inefficiency.

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