Suppose that a firm is located along a river.The firm uses water from the river to cool its machinery and returns the water to the river several degrees warmer,which has led to a decline in the fish population downstream of the firm.
The damage to the downstream fish is a(n):
A)relevant cost of production.
B)relevant cost of production only if the firm is charged a fine for the damage done.
C)relevant cost of production only if there are commercial fishing activities downstream.
D)implicit cost of production which the firm will take into account in determining profit maximizing output.

Question

Quizplus · Accepted Answer

Costs imposed on others are costs of production even if the firm does not have to pay those costs.

Suppose That a Firm Is Located Along a River