If Policymakers Use a Pollution Tax to Control Pollution, the Tax

question 68

Multiple Choice

If policymakers use a pollution tax to control pollution, the tax per unit of pollution should be set

• A)equal to the marginal external cost at the economically efficient level of pollution.
• B)equal to the marginal private cost of production at the economically efficient level of pollution.
• C)equal to the amount of the deadweight loss created in the absence of a pollution tax.
• D)at a level low enough so that producers can pass along a portion of the additional cost onto consumers without significantly reducing demand for the product.

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