Exhibit 14-1 Private and Social Cost

Exhibit 14-1 Private and social cost

The perfectly competitive profit-maximizing firm in Exhibit 14-1 creates water and air pollution as a consequence of producing its output of pigs. If pollution costs are borne by third parties, the firm will maximize economic profit by choosing to:

A) voluntarily incur costs to reduce its pollution.
B) produce at output rate Q₃.
C) produce at output rate Q₂.
D) produce at output rate Q₄.