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Marginal social benefit and marginal social cost

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Reference no: EM131192007

The graph below shows the marginal social benefit and marginal social cost of pollution.

  • What is the optimal level of pollution shown on the graph?
  • Would a new regulation that resulted in the level of pollution shown by Q3 be considered too lenient? Please explain.
  • Would the dollar amount of the Pigovian tax necessary to make this market operate efficiently be $10, $40, $50, $60, or $100?
  • If new research indicated that the negative effects of a this pollutant were worse that we had though which of the curves would shift, and in what direction?

Reference no: EM131192007

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