Consider some type of industrial pollution that generates air pollution.This industry,if left unregulated,produces
A)more than the efficient level because producers ignore the marginal external costs.
B)the efficient level of output.
C)less than the efficient level because producers ignore the marginal external costs.
D)less than the efficient level because producers ignore the marginal external benefits.
E)more than the efficient level because producers ignore the marginal external benefits.

Question

Quizplus · Accepted Answer

The industry, if left unregulated, will produce more than the efficient level because producers ignore the marginal external costs. This is because the external costs of pollution are not borne by the producers, but by the society as a whole in terms of health problems, reduced property values, and environmental damage. Therefore, the producers have no incentive to take these external costs into account and will overproduce, causing a market failure.

Consider Some Type of Industrial Pollution That Generates Air Pollution