Why Is the Optimal Quantity of Pollution Not Less Than

question 270

Multiple Choice

Why is the optimal quantity of pollution not less than the point at which the marginal benefit equals the marginal cost?

• A) The point of intersection occurs at a low level of pollution.
• B) There are no external costs below that level.
• C) Below that point firms will have to reduce the quantity that they are currently producing and lower the price.
• D) Below that point the value that people place on less pollution is less than the cost of reducing the pollution.

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Definitions:

Inventory Cost Formula

The method used to determine the cost of goods available for sale or the cost of goods sold, such as FIFO (First-In, First-Out), LIFO (Last-In, First-Out), or Average Cost.

Prior Writedown

A reduction in the book value of an asset when its market value falls below its current book value, previously accounted for in financial statements.

Consigned Goods

Items given to a third party to sell on behalf of the owner, but the owner retains ownership until the goods are sold.