Which of the Following Statements Is True About the Optimal

question 105

Multiple Choice

Which of the following statements is true about the optimal quantity of pollution?

• A) It equals zero.
• B) Pollution abatement should continue up to the point where marginal cost equals the average total cost.
• C) Trade-offs exist between producing a cleaner environment and producing other goods and services.
• D) Firms should be allowed to determine the profit-maximizing amount of pollution abatement.

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Definitions:

Risk-Free Asset

An investment that is considered to have negligible risk of financial loss, typically government bonds of stable countries.

Capital Allocation Line

A line representing the risk-return trade-off of different portfolios, showing the highest expected return for a given level of risk.

Standard Deviation

A measure of the dispersion or variation in a set of values, indicating how much the values differ from the mean of the set.