Use the following to answer question 92:
Figure: The Optimal Quantity of Pollution
-(Figure: The Optimal Quantity of Pollution)Use Figure: The Optimal Quantity of Pollution.The figure shows the marginal social cost (MSC)and marginal social benefit (MSB)for firms that pollute the air with sulphur dioxide.Using the figure,the optimal Pigouvian tax per unit of pollution is:
A) $500.
B) $250.
C) $167.
D) $83.

Question

Use the following to answer question 92:
Figure: The Optimal Quantity of Pollution 
-(Figure: The Optimal Quantity of Pollution)Use Figure: The Optimal Quantity of Pollution.The figure shows the marginal social cost (MSC)and marginal social benefit (MSB)for firms that pollute the air with sulphur dioxide.Using the figure,the optimal Pigouvian tax per unit of pollution is:
A) $500. 
B) $250. 
C) $167. 
D) $83.

Quizplus · Accepted Answer

The optimal Pigouvian tax is equal to the difference between MSC and MSB at the socially optimal level of pollution. In the figure, this occurs where MSC intersects with MSB, at a quantity of 6 units of pollution. At this quantity, MSC = $300 and MSB = $467. Therefore, the optimal Pigouvian tax per unit of pollution is $167 ($467 - $300).

Use the Following to Answer Question 92