It Is the Custom for Paper Mills Located Alongside the Layzee

question 30

Multiple Choice

It is the custom for paper mills located alongside the Layzee River to discharge waste products into the river. As a result, operators of hydroelectric power-generating plants downstream along the river
find that they must clean up the river's water before it flows through their equipment.
If the government intervenes and corrects the externality in the situation described, we would
Expect

• A) the supply of the output from the hydroelectric power plants to decrease.
• B) the supply of the output from the hydroelectric power plants to increase.
• C) the demand for the output from the hydroelectric power plants to decrease.
• D) the demand for the output from the hydroelectric power plants to increase.