Figure: MSB and MSC of Pollution (Figure: MSB

question 117

Multiple Choice

Figure: MSB and MSC of Pollution (Figure: MSB and MSC of Pollution) The figure MSB and MSC of Pollution shows the marginal social cost and marginal social benefit of pollution.What level of pollution would be emitted in a market economy without government regulation?

• A)Q₁
• B)Q₂
• C)Q₃
• D)Q4

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Definitions:

Long-run

A period of time in which all factors of production and costs are variable, allowing companies to adjust all inputs.

Industry Supply Curve

A graphical curve that shows the total quantity of a good that producers in an industry are willing and able to supply at different price levels.

Long-run Total Cost

The total cost associated with the production of a certain quantity of output when all inputs, including both fixed and variable, are fully adjustable.

Average Cost Function

An equation that represents the total cost of producing goods or services divided by the quantity of goods or services produced.