The ideal pollution tax adds how much to private cost?
A) as much as possible
B) an amount that will maximize government tax revenue
C) an amount equal to the market price
D) an amount equal to the external cost
E) nothing

Question

Quizplus · Accepted Answer

The ideal pollution tax is designed to internalize the external costs of pollution, meaning it adds an amount to the private cost that is equal to the external cost. This approach ensures that the price of the good or service reflects its true cost to society, including environmental damages.

The Ideal Pollution Tax Adds How Much to Private Cost