If the government taxes a steel company by an amount equal to the damages of each marginal ton of steel, then the steel company's marginal cost curve is the same as the marginal
A) damage cost curve.
B) social cost curve.
C) private cost curve.
D) benefit cost curve.

Question

Quizplus · Accepted Answer

When the government taxes a steel company by an amount equal to the damages of each marginal ton of steel, it effectively internalizes the external costs associated with steel production. This means the marginal cost curve of the company now reflects not only the private costs of production but also the external costs (damages) associated with each additional ton of steel. Therefore, the company's marginal cost curve becomes the same as the marginal social cost curve, which includes both private and external costs.

If the Government Taxes a Steel Company by an Amount