The Marginal External Cost Associated with Air Pollution Increases with the Annual

question 41

Multiple Choice

The marginal external cost associated with air pollution increases with the annual output of a pollut?ing industry.At the current competitive equilibrium level of output per year, the marginal external cost is $10 per unit of output.To achieve efficiency, a corrective

• A)tax of $10 per unit of output is required.
• B)tax of more than $10 per unit of output is required.
• C)tax of less than $10 per unit of output is required.
• D)subsidy of $10 per unit of output is required.

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Definitions:

Marginal Rate of Substitution

The rate at which a consumer is willing to trade one good for another while maintaining the same level of utility.

Pareto Optimal

An arrangement of resources where it is unworkable to elevate any person’s or preference's state without concurrently depreciating another’s.

Blue Price

This term does not have a widely recognized definition and could refer to specific market jargon or a particular pricing strategy.

Ambrosia

In Greek mythology, ambrosia is considered the food or drink of the gods, often depicted as conferring longevity or immortality upon whoever consumed it.