When using pollution charges to improve efficiency in a market with an external cost,regulators attempt to set the pollution charge equal to the
A) marginal social cost of production.
B) marginal external cost of production.
C) marginal private cost of production.
D) marginal private benefit of consumption.
E) marginal external benefit minus the marginal external cost.

Question

Quizplus · Accepted Answer

Regulators aim to set the pollution charge equal to the marginal external cost of production to internalize the externalities, ensuring that producers account for the costs their pollution imposes on society, thus aligning private costs with social costs for more efficient market outcomes.

When Using Pollution Charges to Improve Efficiency in a Market