Suppose a wallet firm has been dumping its wastes into the local river. The government finds out and insists that the firm pay for the cost of the river cleanup. As a result, we can expect:
A) more wallets to be produced at a lower price.
B) more wallets to be produced at a higher price.
C) fewer wallets to be produced at a lower price.
D) fewer wallets to be produced at a higher price.

Question

Quizplus · Accepted Answer

The cost of the cleanup will increase the overall cost of production for the wallet firm. In order to make up for this increased cost, the firm will have to either produce fewer wallets or raise the price of each wallet. Therefore, we can expect fewer wallets to be produced at a higher price.

Suppose a Wallet Firm Has Been Dumping Its Wastes into the Local