Assume that production from an electric utility caused acid rain.If the government imposed a tax on the utility equal to the marginal external cost of the acid rain, the government's action would

Question

Quizplus · Accepted Answer

Imposing a tax equal to the marginal external cost would force the electric utility to bear the cost of the pollution it is producing, making it internalize the externality. This would incentivize the utility to reduce its pollution and promote a more economically efficient outcome.

Assume That Production from an Electric Utility Caused Acid Rain