Suppose that the production of penicillin generates pollution of the Columbia River, which is gradually killing a valuable fish population. Among other problems, fishermen in the area are experiencing a decline in their incomes. Suppose that the demand and supply of penicillin is shown in the accompanying graph, where S(MC_private) reflects the private marginal costs of production and S(MC_social) represents the social marginal costs of production. Based on this information, without government intervention in the market the equilibrium price and quantity of penicillin produced will be: 

a. $65,000 per ton; 7 tons per period.

b. $65,000 per ton; 8 tons per period.

c. $60,000 per ton; 8 tons per period.

d. $60,000 per ton; 7 tons per period.

e. $70,000 per ton; 8 tons per period.

Transcribed Image Text:

80000 75000 70000 65000 8 60000 55000 50000 45000 Price per ton 4 D(MB) S(MCprivate) 00 -S(MCsocial) 5 6 7 9 10 11 Quantity (tons of penicillin per period) 12