The figure shows the marginal social benefit and marginal social cost arising fr

Question

The figure shows the marginal social benefit and marginal social cost arising from a toxic chemical that is released into the air by a plastics manufacturer. Which of the following statements is true? At every level of pollution, the marginal social benefit exceeds the marginal social cost. The optimal level of pollution is zero. At every level of pollution, the marginal social cost exceeds the marginal social benefit. The optimal level of pollution is 60 tons. An uncompensated cost that an individual or firm imposes on others is known as an unfair cost. an overflow cost. an illegal cost. an external cost. A Pigouvian subsidy is a payment designed to encourage activities that yield external benefits. a payment designed to improve profitability of private enterprises. a payment to compensate private parties for transactions costs incurred in negotiating away externalities O a payment designed to encourage people to take care of their health.

Explanation / Answer

The optimal level of pollution is 60 tons. An external cost. A payment designed to encourage activities that yield external benefits.

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