Private and competitive markets could produce efficient levels of pollution if

Question

Quizplus · Accepted Answer

Private and competitive markets may not consider the external costs associated with pollution. To account for these costs, the appropriate tax per unit of pollution can be administered which would incentivize firms to reduce their pollution levels to the efficient level. This can lead to an economically efficient outcome where the marginal benefit of reducing pollution equals the marginal cost of pollution reduction.

Private and Competitive Markets Could Produce Efficient Levels of Pollution