Figure 5-1 Suppose There Are Several Paper Mills Producing

question 58

Multiple Choice

Figure 5-1 Suppose there are several paper mills producing paper for a market.These mills,located upstream from a fishing village,discharge a large amount of wastewater into the river.The waste material affects the number of fish in the river,and the use of the river for recreation and as a public water supply source.Figure 5-1 shows the paper market.Use this Figure to answer the following question(s) .
-Refer to Figure 5-1.What does S₂ represent?

• A)the market supply curve that reflects social cost
• B)the market supply curve that reflect private cost
• C)the market supply curve that reflects external cost
• D)the market supply curve that reflects social benefit

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Definitions:

Perfect Mobility

An economic condition where factors of production such as labor and capital can be easily moved across industries or geographies without costs or barriers.

Perfect Knowledge

A hypothetical situation in which all parties in the market have complete and absolute information about the market conditions and variables.

Variable Costs

Costs that change in proportion to the level of production or business activity.

Total Revenue

The total income generated by the sale of goods or services related to the company's primary operations.