The dry-cleaning industry is a major source of air pollution. Based on this information, which conclusion is the most likely to be trueabout the price and output of dry-cleaning services?O Because dry-cleaning does not have much demand, pollution is not affecting their demand.O Dry-cleaning is a complimentary good.O Dry-cleaners see it as less profitable to cause pollution.Because there are no financial consequences for the pollution, fixing it wouldn't be as profitable for dry-cleaners.

Answered: The dry-cleaning industry is a major…

Essentials of Economics (MindTap Course List)

8th Edition

ISBN:9781337091992

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter10: Externalities

Section: Chapter Questions

Problem 9PA

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The dry-cleaning industry is a major source of air pollution. Based on this information, which conclusion is the most likely to be true
about the price and output of dry-cleaning services?
O Because dry-cleaning does not have much demand, pollution is not affecting their demand.
O Dry-cleaning is a complimentary good.
O Dry-cleaners see it as less profitable to cause pollution.
Because there are no financial consequences for the pollution, fixing it wouldn't be as profitable for dry-cleaners.

Expert Solution

Step 1

The dry cleaning industry is making air pollution. Along these lines, it makes a negative externality. Because of the absence of administrative measures, the dry-cleaning firms are just considering the peripheral private expense to choose the degree of the result. Since the peripheral private expense is lower than the minimal social expense, it is communicated into the lower cost. Because of lower cost, the interest increments. Along these lines, at the market productive equilibrium level, the cost is low and the result is high.

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