Multiple Choice
Let MC be the marginal private cost per megawatt hour (MWh) of producing electricity using coal. Let MSC be the marginal social cost per MWh and T be the tax per MWh. To achieve efficiency, the tax should be set so that
A) MSC = MC + T.
B) MC + MSC = T.
C) MC = T.
D) MC = MSC + T.
Correct Answer:
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