Answer to Question #52973 in Microeconomics for Yana

Question

multiple choice
1. From an economic viewpoint, the optimal amount of pollution:
a. is zero since all pollution imposes costs on society.
b. is that amount which firms create when they maximize economic profits by setting their
marginal private costs equal to market price.
c. is that amount where the marginal social costs of producing a good precisely equals the
price of the good.
d. b and c are correct.

2. In order to increase society's total welfare (social efficiency), a production process that produces a negative externality should be:
a. taxed.
b. provided by the government.
c. ignored.
d. subsidized.

Answer 1

1. From an economic viewpoint, the optimal amount of pollution:
a. is zero since all pollution imposes costs on society.
2. In order to increase society's total welfare (social efficiency), a production process that produces a negative externality should be:
a. taxed.