The marginal external cost per unit of effluent discharged into a river by a perfectly competitive chemical industry is currently estimated to be $50 per ton per year.Which of the following state?ments is true?

Question

Quizplus · Accepted Answer

Efficiency in this context means that the marginal external cost of pollution is internalized by the polluters. By imposing a $50 per ton annual effluent charge, the firms in the chemical industry are made to bear the external cost of their pollution, thereby aligning private costs with social costs. This encourages firms to reduce pollution to the level where the marginal cost of pollution abatement equals the marginal external cost, achieving an efficient outcome.

The Marginal External Cost Per Unit of Effluent Discharged into a River