The economic rationale behind effluent fees is
A) to eliminate all pollution.
B) to create external diseconomies.
C) to expand the role of regulatory agencies.
D) unsound because the private market system is not given the freedom to eliminate the pollution problem.
E) to bring the private cost of waste disposal closer to the social cost.

Question

Quizplus · Accepted Answer

The economic rationale behind effluent fees is to bring the private cost of waste disposal closer to the social cost. This is because the private cost of waste disposal does not take into account the negative externalities or social costs of pollution, such as health hazards and environmental degradation. Effluent fees, also known as pollution charges or environmental taxes, are used to internalize these external costs by charging polluters for the amount of pollution they generate. This creates an incentive for firms to reduce their pollution levels and adopt cleaner production technologies, as it becomes cheaper for them to do so. By bringing the private cost closer to the social cost, effluent fees help to achieve a more efficient allocation of resources and reduce the overall costs of pollution to society.

The Economic Rationale Behind Effluent Fees Is