-The above figure shows the market for steel ingots.If the market is competitive,then to achieve the socially optimal level of pollution,the government can
A) outlaw the production of steel.
B) institute a specific tax of $25.
C) institute a specific tax of $50.
D) institute a specific tax equal to area b.

Question

-The above figure shows the market for steel ingots.If the market is competitive,then to achieve the socially optimal level of pollution,the government can
A) outlaw the production of steel. 
B) institute a specific tax of $25. 
C) institute a specific tax of $50. 
D) institute a specific tax equal to area b.

Quizplus · Accepted Answer

Instituting a specific tax of $50 would internalize the external cost of pollution, aligning private costs with social costs and achieving the socially optimal level of pollution.

-The Above Figure Shows the Market for Steel Ingots