If no externalities of pollution exist in a particular industry, the interaction of demand and supply _______.
A) is based on benefits individuals perceive while maximizing utility
B) is based on choices about production relative to total average costs
C) will coordinate social costs and benefits
D) shifts so supply has no relation to social costs

Question

Quizplus · Accepted Answer

The interaction of demand and supply will coordinate social costs and benefits because, in the absence of externalities, the costs borne by producers and the benefits received by consumers reflect the true social costs and benefits of production and consumption.

If No Externalities of Pollution Exist in a Particular Industry