If an aluminum manufacturer does not bear the entire cost of the smoke it emits, it will
A)emit a lower level of smoke than is socially efficient.
B)emit a higher level of smoke than is socially efficient.
C)emit an acceptable level of smoke.
D)not emit any smoke in an attempt to avoid paying the entire cost.

Question

Quizplus · Accepted Answer

If the aluminum manufacturer does not bear the full cost of the smoke it emits, it will not have the incentive to reduce emissions to the socially efficient level. Without the full cost, the manufacturer will emit a higher level of smoke than is socially efficient, leading to negative externalities for society such as air pollution and health issues.

If an Aluminum Manufacturer Does Not Bear the Entire Cost