Asked by Janysh Kudaibergenov on May 06, 2024
Verified
Because air cargo as an industry involves the generation of pollutants in engine exhaust, the equilibrium price of air cargo services:
A) is above the optimal level, and quantity is below the optimal level.
B) is below the optimal level, and quantity is above the optimal level.
C) and quantity of trucking services are both above the optimal level.
D) and quantity of trucking services are both below the optimal level.
E) must fall in order for the market to reach equilibrium.
Equilibrium Price
The price at which the quantity of a product offered for sale equals the quantity of that product in demand.
Air Cargo
Goods being transported by aircraft, often for commercial purposes or rapid delivery.
Pollutants
Substances or objects that cause pollution, negatively affecting air, water, or soil quality.
- Acknowledge the role externalities play in determining market efficiency and the socially ideal production and consumption quantities.
- Recognize the significance of adjustments in demand and supply in reaction to external drivers.
Verified Answer
MN
Michael Nguyen, M.D.May 13, 2024
Final Answer :
B
Explanation :
The generation of pollutants represents a negative externality, which typically leads to a market outcome where the price is lower and the quantity produced is higher than the socially optimal level. This is because the external costs to society (e.g., pollution) are not fully accounted for in the market price.
Learning Objectives
- Acknowledge the role externalities play in determining market efficiency and the socially ideal production and consumption quantities.
- Recognize the significance of adjustments in demand and supply in reaction to external drivers.