An Environmental Economic Consulting Firm Is Hired to Measure the Negative

question 5

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 MSC = 2Q+30 and the marginal private cost of production to be +30. The market demand curve for the industry can be expressed as P = 60-Q. If the industry currently does not take into account the negative externality in its supply decisions, the industry is ________________ by _____________ units relative to the social optimum.

• A)under-producing; 5
• B)over-producing; 5
• C)under-producing; 8
• D)over-producing; 8

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Definitions:

Standard of Care

The degree of care and caution expected from a person or professional under specific circumstances.

Environmental Legislation

Laws and regulations enacted by government bodies to protect the environment from pollution, degradation, and other harms, often setting standards for air, water, and soil quality.

Pollution

The contamination of the natural environment by harmful substances leading to adverse effects on living beings and ecosystems.