Asked by Aerial Johnson on May 04, 2024
Verified
Constructing plastic containers produces air pollutants. Therefore, in the market for plastic containers,
A) the marginal social cost curve is above and to the right of the demand curve.
B) the marginal social cost curve is below and to the left of the demand curve.
C) the marginal social cost curve is above and to the left of the supply curve.
D) the marginal social cost curve is below and to the right of the supply curve.
E) there is a gap between quantity supplied and quantity demanded in equilibrium.
Marginal Social Cost
Sum of the marginal cost of production and the marginal external cost.
Air Pollutants
Substances in the air that can cause harm to humans and the environment.
Plastic Containers
Manufactured receptacles made from plastic materials, used for storing, transporting, and packaging goods.
- Identify the concepts of marginal private cost, marginal external cost, and marginal social cost.
- Appreciate the importance of alterations in demand and supply prompted by external conditions.
Verified Answer
DG
DEEPTHI GALAGALIMay 07, 2024
Final Answer :
C
Explanation :
The marginal social cost (MSC) includes both the private costs incurred by producers and the external costs (such as air pollution) borne by society. Since producing plastic containers generates air pollutants, the MSC is higher than the private cost reflected in the supply curve. Therefore, the MSC curve is positioned above and to the left of the supply curve, indicating that the true cost of producing an additional unit is higher than what the market supply curve suggests.
Learning Objectives
- Identify the concepts of marginal private cost, marginal external cost, and marginal social cost.
- Appreciate the importance of alterations in demand and supply prompted by external conditions.
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