Producing paper creates pollution.There is no externality in the consumption of paper.The efficient quantity of paper produced occurs when the
A)marginal social benefit from paper is equal to zero.
B)marginal social cost of the pollution from making paper is equal to zero.
C)marginal private cost of the pollution from making paper is equal to zero.
D)marginal private cost of paper equals the marginal private benefit from paper.
E)marginal social benefit from paper is equal to the marginal social cost of paper.

Question

Quizplus · Accepted Answer

When producing paper, there is a social cost (pollution) that is not taken into account by the private cost of production. Therefore, the efficient quantity of paper produced occurs when the marginal social benefit is equal to the marginal social cost, incorporating the cost of pollution. Choice E captures this idea.

Producing Paper Creates Pollution