Question

In a small​ town, a steel mill produces air pollution. if the government does not​ intervene, the equilibrium price of steel will be​ __________, and the equilibrium quantity of steel will be​ __________.
a. less than the socially optimal​ price, greater than the socially optimal quantity

b. equal to the socially optimal​ price, equal to the socially optimal quantity

c. greater than the socially optimal​ price, less than the socially optimal quantity

d. greater than the socially optimal​ price, greater than the socially optimal quantity

e. less than the socially optimal​ price, less than the socially optimal quantity the government could best correct this externality by ▼ subsidizing the production of steel prohibiting the production of steel taxing the production of steel .

Answer 1

Answer: a. less than the socially optimal​ price, greater than the socially optimal quantity

Explanation:

The steel mill is producing steel and selling at a rate that does not account for the pollution that it is causing. Because of this, it is selling at a lower equilibrium price than what it would had the Pollution been accounted for.

The Steel Mill is also selling quantity that is greater than what would be considered socially optimal because the socially optimal level would account for the pollution and adjust in such a way that the Pollution is minimized