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Chapter 5: Q 18 (page 122)

Based on your answer to Question 5-17, if Pennsylvania's government aims to correct the steel market's negative externality via an effluent fee, is the appropriate fee higher or lower now than steel producers have adopted the new technique? Why or why not?

Short Answer

Expert verified

Since the steel producers have adopted the new technique the appropriate fee will be higher.

Step by step solution

Step 1. Given Information

The graph for the steel market is,

Step 2. The affluent fee

Since the steel producers have adopted the new technique the appropriate fee will be higher as the new technique would lead to greater production which would lead the government to increase the fees as to decrease negative externality.

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