Suppose the production of DVDs generates sulfur dioxide, an air pollutant. Then the market price for DVDs:
a. is less than the marginal cost to society of producing DVDs
b. is more than the marginal cost to society of producing DVDs
c. equals the marginal cost to society of producing DVDs
d. may be more than, less than, or equal to the marginal cost of society producing DVDs

Question

23-12-2022
Business

Answered

Suppose the production of DVDs generates sulfur dioxide, an air pollutant. Then the market price for DVDs:
a. is less than the marginal cost to society of producing DVDs
b. is more than the marginal cost to society of producing DVDs
c. equals the marginal cost to society of producing DVDs
d. may be more than, less than, or equal to the marginal cost of society producing DVDs

Answer :

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aamirmajeed5100 aamirmajeed5100 · Answer 1 · 2022-12-25T11:27:09-05:00

D. The market price for DVDs may be more than, less than, or equal to the marginal cost to society of producing DVDs.

This is because the market price of a DVD does not take into account the externalities associated with its production, such as the cost of emitting sulfur dioxide. The marginal cost to society of producing a DVD takes into account the externalities, including the cost of air pollution.

If the cost of air pollution is higher than the market price of the DVD, then the marginal cost to society of producing the DVD will be higher than the market price. Conversely, if the cost of air pollution is lower than the market price of the DVD, then the marginal cost to society of producing the DVD will be lower than the market price.

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