If production is characterized by variable technology, the optimal level of air quality occurs where
A)the marginal private cost of air quality equals the marginal social benefit
B)the marginal social cost of air quality equals the marginal social benefit
C)the marginal social cost of air quality equals the marginal private cost of air quality
D)government regulators set it
E)all costs are absorbed by the polluter

Question

Quizplus · Accepted Answer

In a situation with variable technology, the optimal level of air quality occurs where the marginal social cost of air quality equals the marginal social benefit. This is because the marginal social cost includes both the private cost to the polluter and the external costs imposed on society, while the marginal social benefit includes the private benefit to the polluter and the external benefits enjoyed by society. Therefore, this option takes into account all costs and benefits, making it the best choice.

If Production Is Characterized by Variable Technology, the Optimal Level