In the market for fossil-fuel-based electric power,

Question

Quizplus · Accepted Answer

None of the statements are true. The MEC is upward sloping, meaning that as more electricity is produced, the additional cost of producing it increases. The competitive equilibrium may not necessarily produce the socially optimal level of electricity output because externalities such as pollution may not be factored into the decision making by firms. Therefore, the MSC (which includes the costs of pollution) may be higher than the MPC (which do not take into account external costs).

In the Market for Fossil-Fuel-Based Electric Power