Figure 5-4 Suppose There Are Several Paper Mills Producing

Multiple Choice

Figure 5-4 Suppose there are several paper mills producing paper for a market. These mills, located upstream from a fishing village, discharge a large amount of wastewater into the river. The waste material affects the number of fish in the river and the use of the river for recreation and as a public water supply source. Figure 5-4 shows the paper market. Use this Figure to answer the following question(s) .
-Refer to Figure 5-4. Why is there a deadweight loss?

A) because the marginal social cost of producing each additional unit in excess of Q₂ exceeds the marginal benefit
B) because the marginal private cost of producing each additional unit in excess of Q₂ exceeds the marginal benefit
C) because the marginal social benefit of producing each additional unit in excess of Q₂ exceeds the private cost
D) because the marginal private benefit of producing each additional unit in excess of Q₂ exceeds the social cost