-In order for pollution taxes to be effective in eliminating the deadweight loss resulting from pollution, the pollution tax must be set equal to the
A) price of the good.
B) marginal private cost.
C) marginal external cost.
D) marginal benefit of polluting.
E) marginal social cost.

Question

-In order for pollution taxes to be effective in eliminating the deadweight loss resulting from pollution, the pollution tax must be set equal to the
A) price of the good. 
B) marginal private cost. 
C) marginal external cost. 
D) marginal benefit of polluting. 
E) marginal social cost.

Quizplus · Accepted Answer

The pollution tax must be set equal to the marginal external cost to effectively eliminate the deadweight loss from pollution. This aligns the private cost of pollution with its social cost, leading to an efficient level of pollution reduction.

-In Order for Pollution Taxes to Be Effective in Eliminating