Figure 5-4

Suppose there are several paper mills producing paper for a market. These mills, located upstream from a fishing village, discharge a large amount of wastewater into the river. The waste material affects the number of fish in the river and the use of the river for recreation and as a public water supply source. Figure 5-4 shows the paper market. Use this Figure to answer the following question(s).
-Refer to Figure 5-4.What is the economically efficient output level?
A)Q₁
B)Q₂ minus Q₁
C)Q₂
D)Q₁ plus Q₂

Question

Figure 5-4
  
Suppose there are several paper mills producing paper for a market. These mills, located upstream from a fishing village, discharge a large amount of wastewater into the river. The waste material affects the number of fish in the river and the use of the river for recreation and as a public water supply source. Figure 5-4 shows the paper market. Use this Figure to answer the following question(s).
-Refer to Figure 5-4.What is the economically efficient output level?
A)Q₁ 
B)Q₂ minus Q₁ 
C)Q₂ 
D)Q₁ plus Q₂

Quizplus · Accepted Answer

The economically efficient output level is where the marginal social cost (MSC) intersects the marginal social benefit (MSB), which is at Q₂. This is because at this output level, the total net benefit to society is maximized. Therefore, the best choice is to produce at Q₂ to achieve economic efficiency while considering the negative effects of the wastewater discharge.

Figure 5-4 Suppose There Are Several Paper Mills Producing Paper for a Mills