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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.If the government imposed an environmental standard that did NOT allow the quantity of pollution to exceed 40 tonnes,there would be:
A) a socially optimal quantity of pollution.
B) too little pollution because its marginal social benefit would exceed its marginal social cost.
C) too much pollution because its marginal social cost would exceed its marginal social benefit.
D) too much pollution because any pollution is too much from an economist's perspective.

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.If the government imposed an environmental standard that did NOT allow the quantity of pollution to exceed 40 tonnes,there would be:
A) a socially optimal quantity of pollution. 
B) too little pollution because its marginal social benefit would exceed its marginal social cost. 
C) too much pollution because its marginal social cost would exceed its marginal social benefit. 
D) too much pollution because any pollution is too much from an economist's perspective.

Quizplus · Accepted Answer

If the government imposed an environmental standard that did not allow the quantity of pollution to exceed 40 tonnes, there would still be some pollution, but it would be limited to a socially efficient level. However, if the firms are the only beneficiaries of pollution and others bear the costs, the marginal social cost of pollution (i.e., the cost to society) would exceed its marginal social benefit (i.e., the benefit to firms). Therefore, this would result in too much pollution from a social perspective, making choice C the best answer.

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