Figure: Pollution and Efficiency (Figure: Pollution and Efficiency) Look at the figure Pollution and Efficiency.In this market, where sulfur emission is a result of production, too much pollution is found when the price is ________ and the quantity is _.
A)$5; 15
B)$5; 40
C)$25; 20
D)$5; 30

Question

Figure: Pollution and Efficiency   (Figure: Pollution and Efficiency) Look at the figure Pollution and Efficiency.In this market, where sulfur emission is a result of production, too much pollution is found when the price is ________ and the quantity is _.
A)$5; 15 
B)$5; 40 
C)$25; 20 
D)$5; 30

Quizplus · Accepted Answer

In the figure, the point where the Marginal Social Cost (MSC) curve intersects with the Marginal Private Cost (MPC) curve represents the socially optimal level of production. At this point, the price is $5 and the quantity is 40. However, at this level of production, there is still some sulfur emission and hence some pollution. The point where the Marginal Social Benefit (MSB) curve intersects with the Demand (D) curve represents the private optimal level of production where there is no pollution. At this point, the price is higher at $20, but the quantity is much lower at 20. Therefore, too much pollution is found at the socially optimal level of production where the price is $5 and the quantity is 40.