Graph 10-4
-Refer to Graph 10-4.The equivalence of a Pigovian tax and a pollution permit would require that:
A)PB be equivalent to the Pigovian tax
B)QA be equivalent to the amount of pollution allowed by the pollution permit holders
C)the equilibrium price and quantity of pollution be the same in both panel A and panel B
D)all of the above conditions hold

Question

Graph 10-4 
-Refer to Graph 10-4.The equivalence of a Pigovian tax and a pollution permit would require that:
A)PB be equivalent to the Pigovian tax 
B)QA be equivalent to the amount of pollution allowed by the pollution permit holders 
C)the equilibrium price and quantity of pollution be the same in both panel A and panel B 
D)all of the above conditions hold

Quizplus · Accepted Answer

In order for a Pigovian tax and a pollution permit to be equivalent, all of the conditions listed in the answer choices must hold. 
A) PB must be equivalent to the Pigovian tax because PB represents the price paid for the pollution permit. 
B) QA must be equivalent to the amount of pollution allowed by the pollution permit holders because QA represents the quantity of pollution that can be emitted with the pollution permit. 
C) The equilibrium price and quantity of pollution must be the same in both panel A and panel B because this represents the efficient outcome where marginal benefit equals marginal cost. Therefore, all of the above conditions must hold for a Pigovian tax and a pollution permit to be equivalent.

Graph 10-4 -Refer to Graph 10-4.The Equivalence of a Pigovian Tax and Pigovian