A completely successful emission fee:

Question

Quizplus · Accepted Answer

A completely successful emission fee achieves the goal of aligning the private marginal cost curve with the social marginal cost curve. This means that the cost of pollution is fully internalized into the private cost of production, which gives producers an incentive to minimize pollution while still maintaining profitability. However, achieving zero pollution is not the goal of an emission fee, as some level of pollution may still occur as long as it is priced into the cost of production. Option (C) is incorrect as it suggests that the social cost curve should be adjusted to match the private cost curve, which is not the aim of an emission fee. Option (D) is also incorrect as an effective emission fee must impact the private or social MC curve by pricing in the cost of pollution.

A Completely Successful Emission Fee