Figure 5-1 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 5-1 shows the paper market.Use this Figure to answer the following question(s).
-Refer to Figure 5-1.What is the economically efficient output level?

Question

Figure 5-1  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 5-1 shows the paper market.Use this Figure to answer the following question(s).
-Refer to Figure 5-1.What is the economically efficient output level?

Quizplus · Accepted Answer

The economically efficient output level is where the marginal social cost intersects with the marginal social benefit, which is at Q₂. Any other output level would either result in a surplus or a shortage, causing a loss of efficiency. Therefore, the optimal choice is to produce at Q₂.

Figure 5-1 Suppose There Are Several Paper Mills Producing