The Clear Plastic Company's plant discharges large quantities of toxic chemicals into some groundwater sources. Residents in the surrounding area have higher medical bills because of Clear Plastic's pollution. If the firm is forced to pay the social costs of its production

Question

Quizplus · Accepted Answer

If Clear Plastic Company is forced to pay the social costs of its pollution, it will have to cover the cost of medical bills incurred by residents in the surrounding areas. This will increase the company's overall production cost, leading to a reduction in the amount of steel it produces. To recover the additional costs, it will also have to charge more for its steel, which will lead to a rightward shift in its supply curve. Therefore, the correct choice is D - it will produce less and charge more for its steel.

The Clear Plastic Company's Plant Discharges Large Quantities of Toxic