Suppose the External (Pollution) Costs of a Good Are $5

question 336

Multiple Choice

Suppose the external (pollution) costs of a good are $5 million, while the consumer and producer surplus from consuming the good are $2.5 million. Production of this good should be

• A) zero.
• B) cut in half.
• C) controlled by the private market.
• D) unregulated by the government.

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Definitions:

Economic Profit

The profit a company makes after subtracting both its explicit and implicit costs, including opportunity costs, from its total revenues.

Innovation

The introduction of new ideas, products, or methods, aiming at improving efficiency, value, or creating something novel.

Profit-Maximizing

A strategy aiming to achieve the highest possible profit from business operations.

ATC

Short for Average Total Cost, ATC represents the total cost per unit of output, calculated by dividing the total cost by the quantity produced.