assume that kumquats are produced in California and Montana.
Production in warm California is done outdoors, and the spraying of
pesticides on the kumquat crop causes substantial damages for the
neighbors of the kumquat fields. Production in chilly Montana is
done inside of greenhouses, so that the pesticide spraying does no
damage to any neighbors. Consumers of kumquats do not care whether
the kumquats they eat were grown in California or Montana. Also
assume that California growers do not have to compensate their
neighbors for any damages from pesticides, and that the neighbors
are not allowed to "bribe" farmers to alter their production
methods or amounts.
10. Which of the following is true about the output of
California Kumquats
a. it is greater than the efficient amount.
b. it is less than the efficient amount.
c. it is equal to the efficient amount.
d. it could be greater than, less than, or equal to the
efficient amount, deepening on the elasticity of demand for
kumquats.
e. it could be greater than, less than, or equal to the
efficient amount, depending on the relative elasticities of supply
of kumquats from California and Montana.