Suppose that recycling rubber for sneakers creates an external benefit of $2.00 per tonne of rubber. There are no external costs. The efficient amount of rubber will be recycled when the government creates a
A) subsidy of $2.00 per tonne of rubber.
B) tax of more than $2.00 per tonne of rubber.
C) tax of $2.00 per tonne of rubber.
D) subsidy of more than $2.00 per tonne of rubber.

Question

Quizplus · Accepted Answer

A subsidy of $2.00 per tonne of rubber aligns the private cost with the social benefit, encouraging the efficient level of recycling.

Suppose That Recycling Rubber for Sneakers Creates an External Benefit