To reach the socially optimal allocation of resources, the amount of government revenue received from a pollution tax should be
A) equal to the negative externality cost associated with producing the good
B) less than the negative externality cost of producing the good
C) greater than the negative externality cost of producing the good
D) equal to the private cost of producing the good
E) greater than the private cost of producing the good

Question

Quizplus · Accepted Answer

The socially optimal allocation of resources occurs when the pollution tax is equal to the negative externality cost associated with producing the good. This aligns the private cost of production with the social cost, leading to an efficient outcome.

To Reach the Socially Optimal Allocation of Resources, the Amount