The optimal reduction of an externality occurs when:
A)society's marginal cost of reducing that externality is greater than its marginal benefit.
B)public agencies could make a great deal of money.
C)society's marginal cost and marginal benefit of reducing that externality are equal.
D)society's marginal benefit of reducing that externality is greater than its marginal cost.

Question

Quizplus · Accepted Answer

The optimal reduction of an externality is achieved when the marginal cost of reducing the externality equals the marginal benefit, ensuring efficient allocation of resources.

The Optimal Reduction of an Externality Occurs When