A removal or depletion tax on an open-access resource increases the marginal private cost of using the resource by
A)zero
B)the amount of the tax
C)the marginal product of the resource
D)the average private cost of using the resource
E)the average social cost of using the resource

Question

Quizplus · Accepted Answer

A removal or depletion tax is a tax levied on the use of an open-access resource to reduce its depletion. It increases the marginal private cost of using the resource by the amount of the tax, in order to account for the external costs associated with the depletion of the resource. Therefore, the correct answer is B, as the marginal private cost will increase by the amount of the tax levied.

A Removal or Depletion Tax on an Open-Access Resource Increases