Assume That Emissions from Electric Utilities Contribute to Pollution in the Form

question 13

Multiple Choice

Assume that emissions from electric utilities contribute to pollution in the form of acid rain.Which of the following describes how this affects the market for electricity?

• A)The equilibrium in the market is not efficient; the marginal benefit from electricity is greater than the marginal social cost.
• B)A deadweight loss occurs; at equilibrium the additional social cost of production is greater than the additional benefit to consumers.
• C)The equilibrium in the market is not efficient; because of the cost of the acid rain, economic efficiency would be greater if more electricity were produced.
• D)The equilibrium in the market is not efficient; consumer surplus is equal to producer surplus.

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Definitions:

Profit-maximizing

The process or goal of adjusting the production and sale of goods or services to achieve the highest possible profit.

Quantity Discounts

Price reductions given to buyers purchasing large quantities, intended to encourage bulk buying.

Competitive Market

A market structure characterized by many buyers and sellers, free entry and exit, and products that are similar, leading to prices being determined by supply and demand.

Marginal Cost

The cost incurred by producing one additional unit of a good or service.