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Figure: External Cost 1
-(Figure: External Cost 1) Refer to the figure. Paper mills are notorious for emitting horrible smells that impose external costs on those living around the mills. According to the figure, what is the efficient price and quantity of paper?
A) P = $4; Q = 30
B) P = $5; Q = 30
C) P = $6; Q = 50
D) P = $4; Q = 50

Question

Use the following to answer questions:
Figure: External Cost 1 
-(Figure: External Cost 1) Refer to the figure. Paper mills are notorious for emitting horrible smells that impose external costs on those living around the mills. According to the figure, what is the efficient price and quantity of paper?
A) P = $4; Q = 30 
B) P = $5; Q = 30 
C) P = $6; Q = 50 
D) P = $4; Q = 50

Quizplus · Accepted Answer

The efficient price and quantity occur where the social cost curve intersects the demand curve, which is at P = $5 and Q = 30.

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