The following graph shows the market for pollution rights in an economy. The optimal level of air quality is ______.
Figure 17.3

A)0
B)40
C)50
D)70
E)greater than 70

Question

The following graph shows the market for pollution rights in an economy. The optimal level of air quality is ______.​ ​
Figure 17.3
​

A)0 
B)40​ 
C)50​ 
D)70​ 
E)greater than 70​

Quizplus · Accepted Answer

The optimal level of air quality is where the marginal social cost of pollution equals the marginal social benefit of reducing pollution. This is where the demand curve and the marginal cost curve intersect, which in this case is at a pollution level of 50. At this point, the total cost of reducing pollution is minimized while still achieving an acceptable level of air quality. Any pollution level above 50 would result in excessive costs and any pollution level below 50 would result in a missed opportunity to improve air quality.

The Following Graph Shows the Market for Pollution Rights in an Economy