Question

Suppose that a firm is located along a river. the firm uses water from the river to cool its machinery and returns the water to the river several degrees warmer, which has led to a decline in the fish population downstream. if the firm does not have to pay for the damage to the downstream fish, the market equilibrium price will be ________ and the market equilibrium quantity will be _____.

Answer 1

A firm is located along a river, which uses water from the river to cool its machinery and returns the water to the river several degrees warmer, which has led to a decline in the fish population downstream of the firm. If the firm does not have to pay for the damage to the downstream fish, the market equilibrium price will be efficient and the market equilibrium quantity will be efficient.