When there is uncertainty about the marginal abatement cost curve andthe marginal damage cost curve is ________,a tax equal to the ________ is the socially efficient policy.

Question

Quizplus · Accepted Answer

When the marginal damage cost curve is horizontal, it indicates that the marginal damage of pollution is constant regardless of the level of emissions. In this scenario, a tax equal to the marginal damages ensures that the cost of emissions to society is covered, making it the socially efficient policy.

When There Is Uncertainty About the Marginal Abatement Cost Curve