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The Marginal External Cost Associated with Air Pollution Increases with the Annual

Question 32

Multiple Choice

The marginal external cost associated with air pollution increases with the annual output of a polluting industry. At the current competitive equilibrium level of output per year, the marginal external cost is $10 per unit of output. To achieve efficiency,


A) a corrective tax of $10 per unit of output is required.
B) a corrective tax of more than $10 per unit of output is required.
C) a corrective tax of less than $10 per unit of output is required.
D) a corrective subsidy of $10 per unit of output is required.
E) a corrective subsidy of less than $10 per unit of output is required
)

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