-The tables above show the marginal costs and benefits from production of paper. If the market is perfectly competitive and unregulated, the efficient level of output
A) is achieved.
B) can be achieved by giving paper producers a subsidy.
C) can be achieved by imposing a Pigovian tax on paper producers.
D) cannot be achieved.

Question

-The tables above show the marginal costs and benefits from production of paper. If the market is perfectly competitive and unregulated, the efficient level of output
A) is achieved. 
B) can be achieved by giving paper producers a subsidy. 
C) can be achieved by imposing a Pigovian tax on paper producers. 
D) cannot be achieved.

Quizplus · Accepted Answer

In a perfectly competitive and unregulated market, externalities like pollution from paper production are not accounted for, leading to overproduction. A Pigovian tax can internalize the external costs, aligning private costs with social costs, thus achieving the efficient level of output.

-The Tables Above Show the Marginal Costs and Benefits from Production