A completely successful emission charge would

Question

Quizplus · Accepted Answer

The goal of an emission charge is to align the private cost (MC) with the social cost (MC) to incentivize firms to produce the socially optimal level of output. Therefore, the emission charge should shift the private MC curve to the same position as the social MC curve, ensuring that the marginal cost to society of producing the good with the pollution (social MC) is reflected in the price faced by the firm (private MC). Option A is incorrect because completely eliminating pollution may not be socially optimal (some pollution may be acceptable if the benefits of production outweigh the costs), and an emission charge is not typically designed to achieve this outcome. Option C is incorrect because social costs are typically higher than private costs, and an emission charge should aim to internalize these costs by raising private costs. Option D is incorrect because the emission charge needs to shift at least one of the curves to be effective in reducing pollution.

A Completely Successful Emission Charge Would