Suppose That Firms in the Chemical Industry Are Allowed, Free

Multiple Choice

Suppose that firms in the chemical industry are allowed, free of charge, to dump harmful products into rivers. If this is the case in a competitive market, how will the price and output of the chemical products compare with their values under conditions of ideal economic efficiency?

A) Price is too low and output is too small.
B) Price is too high and output is too large.
C) Price is too low and output is too large.
D) Price is too high and output is too small.