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Figure: Efficiency and Pollution
-(Figure: Efficiency and Pollution)Use Figure: Efficiency and Pollution.Assume that firms are the only beneficiaries of pollution and that costs are borne solely by others in the society.In the absence of government intervention,the marginal social cost of pollution will exceed the marginal benefit of pollution by:
A) $25.00.
B) $16.67.
C) $15.00.
D) $0.00.

Question

Use the following to answer questions :
Figure: Efficiency and Pollution 
-(Figure: Efficiency and Pollution)Use Figure: Efficiency and Pollution.Assume that firms are the only beneficiaries of pollution and that costs are borne solely by others in the society.In the absence of government intervention,the marginal social cost of pollution will exceed the marginal benefit of pollution by:
A) $25.00. 
B) $16.67. 
C) $15.00. 
D) $0.00.

Quizplus · Accepted Answer

The marginal social cost of pollution is the cost to society of producing one more unit of pollution. The marginal benefit of pollution is the benefit to firms of producing one more unit of pollution. In the absence of government intervention, the marginal social cost of pollution will exceed the marginal benefit of pollution by the amount of the external cost of pollution. The external cost of pollution is the cost to society that is not borne by the firms that produce the pollution. In this case, the external cost of pollution is $15.00.

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