Use the following to answer questions:
Figure: MSB and MSC of Pollution
-(Figure: MSB and MSC of Pollution) Look at the figure MSB and MSC of Pollution. Suppose pollution is unregulated. What level of emissions tax would move the level of pollution to the socially optimal level?
A) $100
B) $800
C) $500
D) $300

Question

Use the following to answer questions:
Figure: MSB and MSC of Pollution 
-(Figure: MSB and MSC of Pollution) Look at the figure MSB and MSC of Pollution. Suppose pollution is unregulated. What level of emissions tax would move the level of pollution to the socially optimal level?
A) $100 
B) $800 
C) $500 
D) $300

Quizplus · Accepted Answer

The socially optimal level of pollution occurs where the marginal social cost (MSC) equals the marginal social benefit (MSB). An emissions tax of $500 would align the private cost with the social cost, thus achieving the socially optimal level of pollution.

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