Suppose that a vehicle is invented such that it emits no pollutants into the atmosphere.To achieve an efficient market outcome,the government must
A) allow other vehicles that emit pollutants into the atmosphere, as long as vehicle owners pay all the costs associated with their pollution.
B) outlaw SUVs and other vehicles that pollute the environment.
C) be the sole producer of that vehicle.
D) require all auto makers to produce the vehicles that produce zero emissions.

Question

Quizplus · Accepted Answer

Allowing vehicle owners to pay for the costs associated with their pollution through taxes or fees creates an efficient market outcome by internalizing the externalities of pollution. Outlawing other vehicles or requiring all auto makers to produce the zero-emission vehicle would be overly restrictive and limit consumer choice. Being the sole producer of the vehicle would likely result in inefficient production and distribution.

Suppose That a Vehicle Is Invented Such That It Emits