Question

The gross annual production of petrochemical plants situated in the Jamnagar district of the Indian state of Gujarat is around 130 million tons. Each plant follows the​ profit-maximization principle and supplies petrochemicals up to the point where price equals the private marginal cost of production. Industry experts claim that the aggregate production of this industry is socially efficient because at this output level the supply of petrochemicals is equal to its demand.

Which of the​ following, if​ true, would strengthen the claim of the industry experts that production is socially​ efficient?
A. The petrochemical plants have a positive stock of inventory.
B.The transportation cost of distributing petrochemicals to consumers is negligible.
C. The petrochemical industry is one of the leading revenue and employment generating industries in the area.
D. The average price level in the economy is very high.
E. The operation of petrochemical plants does not damage the local tourism industry.

Answer 1

The strengthening statement would be: E. The operation of petrochemical plants does not damage the local tourism industry.

Step-by-step explanation:

This supports the claim of social efficiency by highlighting that the petrochemical plants' operations don't negatively impact another significant industry, ensuring a balance between economic growth and environmental/social considerations.

By asserting that the petrochemical plants' activities don't harm the local tourism industry, it underlines a harmony between industrial production and preserving other vital sectors. This absence of negative externalities suggests that the industry operates without imposing additional costs on society beyond the market price of petrochemicals. Hence, it fortifies the argument that the current production level aligns with societal welfare.

Answer: E. The operation of petrochemical plants does not damage the local tourism industry.