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, we would expect
A)the supply of the output from the hydroelectric power plants to decrease.
B)the supply of the output from the hydroelectric power plants to increase.
C)the demand for the output from the hydroelectric power plants to decrease.
D)the demand for the output from the hydroelectric power plants to increase.

Question

Quizplus · Accepted Answer

If the government intervenes to correct the externality, it would likely impose regulations or take actions to reduce or eliminate the pollution from the paper mills. This would decrease the cleanup costs and operational disruptions for the hydroelectric plants, potentially increasing their efficiency and output.

It Is the Custom for Paper Mills Located Alongside the Layzee