-Producing leather creates external costs in the form of water pollution.The figure above illustrates the market for leather.If the government sets a pollution limit that achieves efficiency,how many tons of leather are produced?
A) 0 tons
B) 200 tons
C) 300 tons
D) more than 300 tons
E) more than 0 tons and less than 200 tons

Question

-Producing leather creates external costs in the form of water pollution.The figure above illustrates the market for leather.If the government sets a pollution limit that achieves efficiency,how many tons of leather are produced?
A) 0 tons 
B) 200 tons 
C) 300 tons 
D) more than 300 tons 
E) more than 0 tons and less than 200 tons

Quizplus · Accepted Answer

The efficient level of production is where the social cost (including external costs like pollution) equals the social benefit. The question implies that with a pollution limit set to achieve efficiency, the market will still produce leather, but at a level that balances these costs and benefits. Without specific figures from the figure mentioned, the general principle suggests that production will not cease entirely (ruling out 0 tons) and will not exceed the level where external costs are not accounted for. Therefore, the answer that fits the description of achieving efficiency, given the options, is 300 tons, assuming this level aligns with the efficient balance between social costs and benefits.

-Producing Leather Creates External Costs in the Form of Water