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Answer to Question #52972 in Microeconomics for Yana

Question #52972
MULTIPLE CHOICE
1. If a chemical manufacturer is forced to internalize the externality associated with the air pollution it creates:
a. the price of chemicals will rise.
b. the supply curve of chemicals will shift to the left.
c. the price of chemicals will fall.
d. both a. and b. will occur.

2. Consider a competitive industry in which a "green" company uses a cleaner but costlier production method than is used by other firms. In the long run, the "green" company will:
a. earn more profit than will the typical firm in the industry.
b. drive its competitors out of business.
c. have economic losses and exit the industry.
d. charge a higher - than - average price for its product.
Expert's answer
1. If a chemical manufacturer is forced to internalize the externality associated with the air pollution it creates:
d. both a. and b. will occur.
2. Consider a competitive industry in which a "green" company uses a cleaner but costlier production method than is used by other firms. In the long run, the "green" company will:
a. earn more profit than will the typical firm in the industry.

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