When faced with a marginal effluent fee (MEF), each polluting source will
A) abate up to the point where its total abatement cost (TAC) equals the MEF
B) abate nothing and pay the MEF on all units of pollution released
C) clean up pollution as long as its marginal abatement cost is lower than the MEF
D) reduce its effluents to zero to avoid paying the effluent fee

Question

Quizplus · Accepted Answer

A rational polluting source will abate up to the point where its marginal abatement cost (MAC) equals the MEF, which is the option given in choice C. In this way, the polluting source will be able to minimize its total abatement cost (TAC). However, the source will not reduce its effluents to zero to avoid paying the MEF, as this would be too expensive in most cases. Similarly, the source will not abate nothing and pay the MEF on all units of pollution released, as this would be an inefficient and costly approach. Choice B can be considered as a last resort or a punishment for violating the regulations.

When Faced with a Marginal Effluent Fee (MEF), Each Polluting