Asked by Story Kremin on Jun 23, 2024
Verified
Suppose that government officials have set an emissions tax to reduce pollution.Further suppose that,with the emissions tax,the marginal social cost of pollution exceeds the marginal social benefit of pollution.The emissions tax is:
A) too low.
B) too high.
C) optimal.
D) efficient.
Marginal Social Cost
The cost to society of producing an additional unit of a good or service, including both private costs and any externalities.
Marginal Social Benefit
The additional gain to society as a whole from an additional unit of a good or service.
Emissions Tax
A tax imposed on the emission of pollutants, aimed at reducing the environmental externality costs of these emissions.
- Analyze the effect of setting emissions taxes lower or higher than the optimal level on pollution.
Verified Answer
HM
Haley MorrisonJun 23, 2024
Final Answer :
A
Explanation :
When the marginal social cost of pollution exceeds the marginal social benefit, it indicates that the emissions tax is too low to fully internalize the external costs of pollution.
Learning Objectives
- Analyze the effect of setting emissions taxes lower or higher than the optimal level on pollution.