Answered: Which of the following indicate the…

Which of the following indicate the marginal external cost and the socially optimal quantity? A $3.00 and 40 units В $2.50 and 60 units C $2.00 and 40 units D $1.00 and 20 units E $1.00 and 80 units

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter12: Environmental Protection And Negative Externalities

Section: Chapter Questions

Problem 20RQ: What is a pollution charge and what incentive does it provide for a firm to take external costs into...

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Concept explainers

Market Failure Analysis

To understand Market failure, we need to first understand welfare economics. An Italian economist, Vilfredo Pareto stated that allocation of resources in an efficient manner such that an economic change, which harms no one and makes someone better off, indicates an increase in social welfare. It is also called Pareto Optimality, where resources cannot further be reallocated without harming one. This does not apply to those economic changes, which harm some and benefit others. social welfare increases if the utility of any of its members' increases and none decrease in the economy.

Question

Which of the following indicate the marginal external cost and the socially optimal quantity?
A
$3.00 and 40 units
В
$2.50 and 60 units
C
$2.00 and 40 units
D
$1.00 and 20 units
E
$1.00 and 80 units

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