Suppose a Certain Good Conveys Either an External Cost or an External

question 8

True/False

Suppose a certain good conveys either an external cost or an external benefit. If the private cost of the last unit of the good that was produced is equal to the private value of that unit, then the sum of producer and consumer surplus is maximized.

---

Definitions:

Full-Cost Pricing

involves incorporating both the direct and indirect costs, such as environmental impacts, into the price of goods and services.

Taxing Pollution

Implementing financial charges on the release of pollutants into the environment as a means to incentivize pollution reduction.

Environmental Quality

A measure of the condition of an environment, including air, water, soil, and living organisms, often assessed to ensure sustainability and human health.

Income Taxes

Mandatory financial charges imposed by governments on individuals' or organizations' earned income, used to fund public services and governmental operations.