Suppose That Electricity Producers Create a Negative Externality Equal to $5

question 425

Multiple Choice

Suppose that electricity producers create a negative externality equal to $5 per unit.What is the relationship between the equilibrium quantity and the socially optimal quantity of electricity to be produced?

• A) They are equal.
• B) The equilibrium quantity is greater than the socially optimal quantity.
• C) The equilibrium quantity is less than the socially optimal quantity.
• D) There is not enough information to answer the question.

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Definitions:

Rent Controls

Government regulations that limit the amount landlords can charge for renting out a property, intending to make housing more affordable for tenants.

Imposed

Something that is enforced or applied by authority.

Government

The system or group of people governing an organized community, often a state, and the institutions through which policies are set and affairs of state are conducted.

Price Control

Price Control is a government policy or legal stipulation that sets limits on the prices that can be charged for goods and services in a market.