An Environmental Economic Consulting Firm Is Hired to Measure the Negative

question 30

Multiple Choice

An environmental economic consulting firm is hired to measure the negative externalities associated with the pollution from an industry. The consultants calculate the marginal social cost of production to be $M S C = 2 Q + 30$ and the marginal private cost of production to be $M P C = Q$ $+ 30$ . The market demand curve can be expressed as $P = 60 - Q$ . If the consultants have accurately measured the impact of the pollution externality, the net social benefit of producing at the social optimum (rather than at the private optimum) is:

• A) \(\$ 0\).
• B) \(\$ 112.5\)
• C) \(\$ 150\).
• D) \(\$ 250\)

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Understand the concept of profit maximization in a perfectly competitive market.

Analyze the impact of fixed and variable costs on a firm’s profit.

Calculate total cost, total revenue, and profit at profit-maximizing output levels.