If Some Firms Internalize Their External Costs by Being a Cleaner

question 87

Multiple Choice

If some firms internalize their external costs by being a cleaner and more "environmentally friendly" producers than other firms that do not, then which of the following offers the best and most complete description of this situation?

• A) The environmentally friendly firm will be operating at a higher marginal and average cost than those firms that shift some costs to society in the form of external costs.
• B) In a long-run competitive equilibrium in which consumers do not distinguish between environmentally friendly and standard producers, the environmentally producers will receive negative economic profits and be forced to change or exit.
• C) Without regulations requiring firms to internalize their external costs, producers can only afford to be environmentally friendly if consumers reward them with a price premium.
• D) None of the above is correct.

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Definitions:

Forms

The structures, shapes, or external appearances of objects as perceived or conceptualized.

Contradictory Propositions

Propositions that cannot both be true at the same time, as they make opposite claims.

Forms

In philosophy, especially in Platonic thought, the ideal or perfect essence of something, which exists beyond the physical representation.

Contradictory

Qualities, statements, or propositions that are in direct opposition to each other, such that if one is true, the other must be false.