A plastics factory emits water pollutants into a nearby river. The mar

A plastics factory emits water pollutants into a nearby river. The marginal private cost of producing plastics and the marginal external cost of the pollutants are both constant with respect to the quantity of plastics produced.

If the demand for plastics is downward sloping, what happens to the socially optimal level of output and market price if the demand curve for plastics shifts rightward? A) Optimal price and quantity increase
B) Optimal price increases, optimal quantity remains unchanged
C) Optimal price remains unchanged, optimal quantity increases
D) Optimal price and quantity remain unchanged

ANSWER

C