If a pollution tax is placed on a firm emitting pollution,the firm will treat pollution,rather than pay the tax,as long as the tax is
A)Above its MPC of pollution control
B)Below its MPC of pollution control
C)Above the MSC of pollution control
D)Below the MSC of pollution control
E)Reasonable

Question

Quizplus · Accepted Answer

If the pollution tax is above the firm's marginal private cost (MPC) of pollution control, it would be cheaper for the firm to invest in pollution control equipment or processes rather than pay the tax. In other words, the cost of reducing pollution is lower than the cost of paying the tax. Therefore, the firm would treat pollution instead of paying the tax.

If a Pollution Tax Is Placed on a Firm Emitting