-The figure above shows the marginal social cost curve of generating electricity, the marginal private cost curve, and the demand curve. If the government imposes a pollution tax to achieve the efficient level of production, the tax equals ________ per kilowatt hour.
A) 2.5 cents
B) 0 cents
C) 15 cents
D) 7.5 cents
E) 10 cents

Question

-The figure above shows the marginal social cost curve of generating electricity, the marginal private cost curve, and the demand curve. If the government imposes a pollution tax to achieve the efficient level of production, the tax equals ________ per kilowatt hour.
A) 2.5 cents 
B) 0 cents 
C) 15 cents 
D) 7.5 cents 
E) 10 cents

Quizplus · Accepted Answer

The efficient level of production is achieved when the marginal social cost equals the demand curve. The tax should equal the difference between the marginal social cost and the marginal private cost at this level, which is 7.5 cents.

-The Figure Above Shows the Marginal Social Cost Curve of Generating