Use the Following to Answer Question

question 142

Multiple Choice

Use the following to answer question:
Figure: MSB and MSC of Pollution
-(Figure: MSB and MSC of Pollution) Use Figure: MSB and MSC of Pollution.Assume that firms are the only beneficiaries of pollution and that costs are borne solely by others in the society.If the current level of pollution is at Q₁,_____ pollution is being emitted because _____.

• A)not enough;MSB > MSC
• B)not enough;MSB < MSC
• C)too much;MSB > MSC
• D)the socially optimal amount of;MSB = MSC

---

Definitions:

Future Earnings

Projected or anticipated earnings of a company, based on current trends, industry conditions, and other factors.

Term Lending Agreement

A contractual agreement between a borrower and a lender that stipulates the terms and conditions under which a loan will be advanced and repaid over a specific period.

Original Maturity

The original duration set during the issuance of a financial instrument, such as a bond or loan, indicating the period until the principal is supposed to be paid back.

GAAP

The standardized set of accounting principles, standards, and procedures issued by the Financial Accounting Standards Board (FASB) for companies in the U.S.