Refer to the Figure above. Suppose that MD_u represents the damages associated with ambient levels of benzene in an urban area and MD_r represents those same damages in a rural area. If the ambient emission standard is set at e_u_,the standard yields a (n) _________ level of pollution in urban areas but is unnecessarily ____________ for rural areas. A) socially efficient; strict B) socially efficient; lenient C) inefficient; acceptable D) inefficient; compromised

Question

Quizplus · Accepted Answer

The socially efficient level of pollution is where the marginal cost of pollution equals the marginal benefit of pollution. By setting the emission standard at e_u_,, it achieves this efficient level in urban areas. However, since the damages associated with ambient levels of benzene are lower in rural areas (MD_r < MD_u), this same standard is unnecessarily strict in rural areas. Therefore, the standard is socially efficient in urban areas but too strict, and hence not socially efficient, in rural areas. Choice A is the only option that correctly identifies the socially efficient level of pollution in urban areas and the unnecessary strictness of the emission standard in rural areas.

Refer to the Figure Above