Use the table below to answer the following questions.
Table 16.3.1

-Refer to Table 16.3.1. The table shows marginal private benefit and the marginal social benefit from the consumption of chemical fertilizer and the marginal social cost of the production of fertilizer. If production is left to the private market, then
A)an efficient quantity is produced.
B)imposing a tax leads to production of the efficient quantity.
C)too much fertilizer is produced.
D)a system of pollution permits leads to production of the efficient quantity.
E)an inefficient quantity is produced.

Question

Use the table below to answer the following questions.
Table 16.3.1
 
-Refer to Table 16.3.1. The table shows marginal private benefit and the marginal social benefit from the consumption of chemical fertilizer and the marginal social cost of the production of fertilizer. If production is left to the private market, then
A)an efficient quantity is produced. 
B)imposing a tax leads to production of the efficient quantity. 
C)too much fertilizer is produced. 
D)a system of pollution permits leads to production of the efficient quantity. 
E)an inefficient quantity is produced.

Quizplus · Accepted Answer

The marginal private benefit (MPB) exceeds the marginal social benefit (MSB) at all levels of production, indicating that consumers are not considering the external costs of fertilizer production on the society. Moreover, the marginal social cost (MSC) exceeds the MSB after a certain point, indicating that the society is bearing more costs than benefits from additional fertilizer production. Therefore, the private market will tend to produce an inefficient quantity, as it does not take into account the external costs associated with fertilizer production.

Use the Table Below to Answer the Following Questions