-Producing Leather Creates External Costs in the Form of Water

Multiple Choice

-Producing leather creates external costs in the form of water pollution. The figure above illustrates the market for leather. If the government sets a pollution limit that achieves efficiency, how many tonnes of leather are produced?

A) 300 tonnes
B) 0 tonnes
C) 200 tonnes
D) More than 300 tonnes
E) More than 0 tonnes and less than 200 tonnes