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

question 65

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 to consumers without significantly reducing demand for the product.

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Definitions:

Disposable Income

The financial scope households possess for spending and saving activities, following income taxes.

APC

The Average Propensity to Consume denotes the percentage of income allocated towards consumption.

Disposable Income

Net disposable financial resources for households focusing on savings and spending post income tax adjustments.

Disposable Income

The budgetary provision for households for saving and spending after income taxes have been processed.