It is the custom for paper mills located alongside the Layzee River to discharge waste products into the river. As a result, operators of hydroelectric power-generating plants downstream along the river find that they must clean up the river's water before it flows through their equipment.If the government intervenes and corrects the externality in the situation described above, we would expect
A)the output of the paper mills to increase.
B)the price of paper from the mills to decrease.
C)production of the hydroelectric power plants to decrease.
D)production in the paper mills to decrease.

Question

Quizplus · Accepted Answer

Correcting the externality typically involves imposing regulations or costs on the paper mills for their pollution. This would likely increase their operating costs, potentially leading to a decrease in production as they adjust to these new expenses or regulations.

It Is the Custom for Paper Mills Located Alongside the Layzee