In order to achieve an efficient result a pollution tax must
A) be equal to the external cost generated.
B) not be passed through to the consumers of the produced good.
C) be equal to the social cost of production.
D) be shared equally by the producer and the consumer of the produced good.

Question

Quizplus · Accepted Answer

A pollution tax must be equal to the external cost generated to internalize the externality, ensuring that the producer accounts for the true cost of production, including environmental damage.

In Order to Achieve an Efficient Result a Pollution Tax