o 5/31/2016 11:00 PM 474/1005/29/2016 10:49 PM Gradebook Calculato Question 12 o
ID: 1216315 • Letter: O
Question
o 5/31/2016 11:00 PM 474/1005/29/2016 10:49 PM Gradebook Calculato Question 12 of 19 Map sapling learning Consider the production of paper in some town. Suppose that the supply of paper is upward-sloping and the demand for paper is downward-sloping. If the production of paper causes a negative extemality of $1.50 per production process in this town is both strong and horrific) and the ream (because the smell of the paper differ from the market price per ream of paper? conditions outlined by the Coase Theorem do not hold, by how much does the optimal price per ream of conditions outined by the Coase Theorem do not hold, by how much does the optimal price per ream of O The optimal price is exactly $1.50 higher than the market price. O The optimal price is exacty $1.50 lower than the market price. O The optimal price is higher than the market price, but by less than $1.50. O The optimal price is more than $1.50 higher than the market price. O The optimal price is lower than the market price, but by less than $1.50 O The optimal price is more than $1.50 lower than the market price There's not enough information to tell. O The optimal price equals the market price. O Previous @check Answer O Next Previous Check Answer 0 Next xít Hint : ExitExplanation / Answer
Correct Answer:
The optimal price is higher than the market price, but by less than $1.5.
Explanation:
Due to negative externality of $1.5, tax will be included into the price. It will increase the price. But, it will also decrease the demand due to increase in prices. Thus, difference between optimal price and market price will be less than $1.5.
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