If a production process creates pollution,a competitive market produces excessive pollution because
A) private marginal cost of pollution exceeds its social marginal cost.
B) social marginal cost of pollution exceeds its private marginal cost.
C) the marginal benefit of pollution to the firm is zero.
D) zero pollution is optimal.

Question

Quizplus · Accepted Answer

In a competitive market, firms do not account for the external costs of pollution, meaning the social marginal cost (the cost to society) of pollution exceeds the private marginal cost (the cost to the firm). This discrepancy leads to excessive pollution because firms do not bear the full cost of their environmental impact.

If a Production Process Creates Pollution,a Competitive Market Produces Excessive