An emission charge decreases private marginal cost and encourages greater output.

Question

Quizplus · Accepted Answer

An emission charge is a type of tax imposed on firms that produce pollutants. The purpose of the tax is to internalize the negative externality of pollution and reduce the quantity of pollution produced. The tax increases the private marginal cost of production, which discourages firms from producing as much output. Therefore, an emission charge does not decrease private marginal cost and does not encourage greater output.

An Emission Charge Decreases Private Marginal Cost and Encourages Greater