In the figure above,if a pollution tax is imposed that is equal to the marginal external cost of pollution,then when the market is in equilibrium,the deadweight loss is ________ per month.
A) $250 thousand
B) $125 thousand
C) $150 thousand
D) $50 thousand
E) zero

Question

Quizplus · Accepted Answer

When a pollution tax is imposed equal to the marginal external cost, it internalizes the externality, aligning the private cost with the social cost. This leads to an efficient market outcome with no deadweight loss, as the market equilibrium reflects the true cost of production including the externalities.

In the Figure Above,if a Pollution Tax Is Imposed That