If production is characterized by variable technology and generates pollution,the optimal level of air quality occurs where _____
A)the marginal private cost of air quality equals the marginal social benefit.
B)the marginal social cost of air quality equals the marginal social benefit.
C)the marginal social cost of air quality equals the marginal private cost of air quality.
D)government regulators set it.
E)the average private cost equals the average social cost.

Question

Quizplus · Accepted Answer

The optimal level of air quality in the presence of variable technology and pollution occurs where the marginal social cost of air quality equals the marginal social benefit. This ensures that the negative externalities of pollution are taken into account and the social welfare is maximized. Choices A and C only take into account the private costs and do not consider social costs. Choice D is not necessarily the optimal level as it depends on the effectiveness of government regulation. Choice E is not relevant to the concept of externalities and does not address the issue of pollution.

If Production Is Characterized by Variable Technology and Generates Pollution,the