To enforce the optimum level of emissions, a government could set an emissions fee, which would be:
A) the dollar value indicated by the intersection of the MSB and MCA curves, and would apply to every unit of pollutants the firm emitted.
B) the dollar value indicated by the intersection of the MSB and MCA curves, and would apply to every unit of pollutants the firm emitted above the standard.
C) the vertical intercept of the MSB curve.
D) the vertical intercept of the MCA curve.
E) the vertical distance between the intercepts of the MSB curve and the MCA curve.

Question

Quizplus · Accepted Answer

The correct answer is A because the emissions fee set at the dollar value where the Marginal Social Benefit (MSB) curve intersects with the Marginal Cost of Abatement (MCA) curve ensures that the cost of emitting pollutants is internalized by the firm for every unit of pollutant emitted, leading to an optimal level of emissions. This approach aligns the private cost of pollution with its social cost, encouraging firms to reduce emissions to the socially optimal level.

To Enforce the Optimum Level of Emissions, a Government Could