Suppose That Coal Producers Create a Negative Externality Equal to $5

question 53

Multiple Choice

Suppose that coal producers create a negative externality equal to $5 per ton of coal. What is the relationship between the equilibrium quantity of coal and the socially optimal quantity of coal?

• A)They are equal.
• B)The equilibrium quantity is greater than the socially optimal quantity.
• C)The equilibrium quantity is less than the socially optimal quantity.
• D)There is not enough information to answer the question.

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Definitions:

Negotiable

Capable of being discussed or modified in order to reach an agreement, or in terms of financial instruments, able to be transferred or assigned from one party to another.

Identified Person

An individual who has been recognized or named in a specific context or for a particular purpose.

Negotiable

Characteristic of a document or instrument that allows its transferability and enforceability by someone other than the original party.

Proceeds

Under Article 9 of the Uniform Commercial Code, whatever is received when collateral is sold or otherwise disposed of.