Suppose That the Government Could Accurately Measure the Marginal Cost $1 / 2(\triangle Q \Delta P)$

question 38

Multiple Choice

Suppose that the government could accurately measure the marginal cost of an externality such as water pollution. In order to reduce production from a plant that emits water pollution, the government places an optimal emissions fee on the plant. The final amount of production equates demand with the marginal social cost to society. The deadweight loss associated with this fee is

• A) equal to the amount of the tax.
• B) equal to the quantity reduction as a result of the tax.
• C) measured as \( 1 / 2(\triangle Q \Delta P) \) .
• D) zero.

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Definitions:

Sales Budget

An estimate of the sales revenue a company aims to achieve in a certain period.

Equipment Acquisitions

Refers to the process of obtaining physical assets for use in production or administrative purposes.

Capital Budget

A financial plan allocating resources for the acquisition or maintenance of long-term assets like property, plants, and equipment.

Variable Operating

Variable Operating Costs are expenses that fluctuate with the level of business activity, including costs like supplies and utilities directly tied to operation levels.