If the government wants to ensure that producers fully internalize the marginal external cost associated with the pollution they emit,then it is necessary to

Question

Quizplus · Accepted Answer

To ensure that producers fully internalize the marginal external cost associated with the pollution they emit, it is necessary to accurately measure that external cost. Once the external cost is accurately measured, the government can impose a tax or a cap-and-trade system to incentivize firms to reduce their level of pollution to the socially optimal level. This will ensure that the producers are internalizing the full cost of their pollution and are not passing on any of the cost to society.

If the Government Wants to Ensure That Producers Fully Internalize