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The table below shows the supply and demand for the output of a firm which creates pollution. The third column shows the supply schedule for
The table below shows the supply and demand for the output of a firm which creates pollution. The third column shows the supply schedule for the firm without paying the costs of pollution. The last column represents the supply curve when the firm also pays the social costs of pollution. Which of the below statements is true? Supply and Demand for a Firm Which Generates Pollution Price Quantity Demanded Quantity Supplied (without paying the costs of the externality) Quantity Supplied (after paying the costs of the externality) $24 0 10 4 $20 1 9 3.5 $19 3 7.5 3 $16 4 4 2 $14 5 3 1.5 $11 7.5 2 1 Select the correct answer below: When the firm pays the costs of pollution, it produces less and charges a higher price in equilibrium. When the firm pays only the private costs of production, it produces too little output. When the firm only pays the private costs of production, the equilibrium price is $19. When the firm also pays the social costs of production, the equilibrium price is $16
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