Suppose that recycling rubber for running shoes creates an external benefit of $2.00 per tonne of rubber.There are no external costs.The efficient amount of rubber will be recycled when the government creates a
A)subsidy of more than $2.00 per tonne of rubber.
B)subsidy of $2.00 per tonne of rubber.
C)tax of more than $2.00 per tonne of rubber.
D)tax of $2.00 per tonne of rubber.
E)voucher valued at $2.10 a tonne of rubber.

Question

Quizplus · Accepted Answer

To correct for the external benefit and achieve the efficient amount of rubber recycling, the government should provide a subsidy equal to the external benefit, which is $2.00 per tonne of rubber. This aligns the private cost with the social cost, encouraging the optimal level of recycling.

Suppose That Recycling Rubber for Running Shoes Creates an External