Asked by

Rosie Jaramillo
on Nov 25, 2024

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It is the custom for paper mills located alongside the Layzee River to discharge waste products into the river. As a result, operators of hydroelectric power-generating plants downstream along the river find that they must clean up the river's water before it flows through their equipment.If the government intervenes and corrects the externality in the situation described above, we would expect

A) the output of the paper mills to increase.
B) the price of paper from the mills to decrease.
C) production of the hydroelectric power plants to decrease.
D) production in the paper mills to decrease.

Externality

An economic term describing an indirect effect of a transaction not reflected in the market price, affecting third parties who did not choose to be involved.

Hydroelectric Power

Energy generated by converting the energy of falling or flowing water into electricity, commonly through the use of dams.

  • Understand the role of government interventions in correcting market failures due to externalities.
  • Acknowledge instances of negative and positive externalities across multiple contexts.
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LC
Lakhan ChauhanDec 02, 2024
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