Suppose that panel (a) of Figure 5-1 applies to Pennsylvanias steel market. Suppose that steel manufacturers in
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Suppose that panel (a) of Figure 5-1 applies to Pennsylvania’s steel market. Suppose that steel manufacturers in this state adopt a new, equal-cost technique for producing steel that entails a smaller external cost. In the absence of any government action to correct the negative externality from steel production, would the overallocation of resources to steel production in Pennsylvania be larger or smaller following the adoption of the next steel-manufacturing technique?
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