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

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 with the marginal social benefit (MSB), which occurs at Q2. Any output level below Q2 results in a lower level of social welfare and any output level above Q2 results in a lower level of profits for the paper mills. Therefore, the best choice is to produce at the output level of Q2.

Suppose There Are Several Paper Mills Producing Paper for a Market.These