Reference: Ref 16-9 a. too little pollution, because its marginal social benefit

Question

Reference: Ref 16-9

a. too little pollution, because its marginal social benefit would exceed its marginal social cost.

Reference: Ref 16-9

(Figure: Efficiency and Pollution) Look at the figure Efficiency and Pollution. If the government imposed an environmental standard that did not allow the quantity of pollution to exceed 20 tons, there would be:

a. too little pollution, because its marginal social benefit would exceed its marginal social cost.

b. too much pollution, because its marginal social cost would exceed its marginal social benefit. c. a socially optimal quantity of pollution. d. too much pollution, because any pollution is too much from an economist's perspective.

Explanation / Answer

Ans is A

At 20, there is too little pollution because its marginal social benefit is greater than marginal social cost. Thus there is net benefit from additional pollution level and socially efficient pollution level os 30.

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