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A Paper Mill Discharges Chemicals into a River Which Pollutes

Question 2

Multiple Choice

A paper mill discharges chemicals into a river which pollutes the shores of a downstream resort area.The private marginal cost,social marginal cost,and marginal benefit associated with the production of paper are given by the following equations: MCP = 5 + Q MCS = 10 + 2Q MB = 35 - 0.5Q.
A competitive free market will produce output of ________ units, and this amount is ________ than the allocatively efficient level of output.


A) 5; less
B) 10; less
C) 15; more
D) 20; more
E) 25; more

Correct Answer:

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