-The table above describes the market for paper. The production of paper produces pollution. There are no external benefits. What is the efficient amount of paper?
A) 10 tonnes per week
B) 60 tonnes per week
C) 30 tonnes per week
D) 40 tonnes per week

Question

-The table above describes the market for paper. The production of paper produces pollution. There are no external benefits. What is the efficient amount of paper?
A) 10 tonnes per week 
B) 60 tonnes per week 
C) 30 tonnes per week 
D) 40 tonnes per week

Quizplus · Accepted Answer

The efficient amount of paper is where the social cost equals the social benefit. Since the production of paper produces pollution (an external cost), the efficient quantity is lower than the market equilibrium to account for the negative externality. Without specific numbers from the table, the general principle is that the efficient amount considers both private and external costs, aiming to maximize overall welfare.

-The Table Above Describes the Market for Paper