The optimal level of air pollution by a firm is _____
A)the level at which the marginal private cost of improving air quality equals zero.
B)the level at which the marginal social cost of improving air quality equals the marginal social benefit.
C)the level at which the average social cost of improving air quality equals the average social benefit.
D)the level at which the total social cost of improving air quality equals the total social benefit.
E)the level at which the marginal social cost of improving air quality is minimized.

Question

Quizplus · Accepted Answer

The optimal level of air pollution by a firm is the level at which the marginal social cost of improving air quality equals the marginal social benefit. This is because air pollution is a negative externality, meaning that the social cost is greater than the private cost. The optimal level would occur where society is getting the maximum net benefit. In other words, the marginal benefit of improving air quality for society is equal to the marginal cost of doing so. Therefore, option B is correct.

The Optimal Level of Air Pollution by a Firm Is