If a Production Process Creates Pollution,a Competitive Market Produces Excessive

question 1

Multiple Choice

If a production process creates pollution,a competitive market produces excessive pollution because

• A) private marginal cost of pollution exceeds its social marginal cost.
• B) social marginal cost of pollution exceeds its private marginal cost.
• C) the marginal benefit of pollution to the firm is zero.
• D) zero pollution is optimal.

---

Definitions:

Risk-free Asset

An investment with zero default risk, often assumed to be government bonds, providing a guaranteed return.

Average Returns

The mean financial return of an investment over a specified period.

Tax Cut

A reduction in the rate of taxes imposed by the government.

Government Contract

A legal agreement between a government entity and a private company for goods or services, often involving specific regulatory requirements.