An emission charge is a fee imposed on the emitter of pollutants, which increases their private marginal cost of production. This, in turn, reduces their output as it becomes expensive to produce the same level of goods and services. Thus, choice C (Increases private marginal cost and reduces output) is the best answer.

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An Emission Charge

Question 48

Multiple Choice

An emission charge

A) Reduces private marginal cost and reduces output.
B) Reduces private marginal cost and increases output.
C) Increases private marginal cost and reduces output.
D) Increases private marginal cost and increases output.

Correct Answer: