Suppose There Are Several Paper Mills Producing Paper for a Market.These

question 196

Multiple Choice

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 5-4 shows the paper market.Use this Figure to answer the following question(s) .
-Refer to Figure 5-4.Why is there a deadweight loss?

• A)because the marginal social cost of producing each additional unit in excess of Q2 exceeds the marginal benefit
• B)because the marginal private cost of producing each additional unit in excess of Q2 exceeds the marginal benefit
• C)because the marginal social benefit of producing each additional unit in excess of Q2 exceeds the private cost
• D)because the marginal private benefit of producing each additional unit in excess of Q2 exceeds the social cost

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Definitions:

Identical Product

A product that is exactly the same in every detail and attribute as another, making them indistinguishable from each other.

High Barriers

Obstacles that make it difficult for new competitors to enter a market, including high start-up costs, complex regulations, or strong brand loyalty.

Market Entry

The strategy or process involved in introducing a new product or service to a target market.

Unregulated Monopolists

Firms that maintain exclusive control over a particular market or product without any oversight or restrictions from regulatory bodies.