If a firm adopts a production process that is costly in order to reduce pollution,the result is

Question

Quizplus · Accepted Answer

Adopting a production process that is costly to reduce pollution will increase the firm's costs, shifting the firm's cost curves upward. This will lead to a decrease in the profit-maximizing rate of output, as the firm will need to charge a higher price to cover its increased costs. The result will be a decrease in the firm's profits. Therefore, option C is the correct answer. Option A is incorrect because the MC curve would increase, not decrease with higher costs. Option B is incorrect because the increased costs would result in a higher ATC curve, not lower.

If a Firm Adopts a Production Process That Is Costly