Chapter 74, Problem 1MCQ

To determine

The socially optimal level of pollution.

Answer to Problem 1MCQ

From the available options, the correct option is less than that created by the market, but not zero.

Explanation of Solution

The fully accounted costs and benefits that are chosen based on the quantity of socially optimal level of pollution would not be zero but less than that created by the market because the decision is based on the economic rule of equating the marginal benefit to the marginal cost. Therefore, it would not be more than the market and firms cannot determine it by themselves but they need to choose the level according to the economic rule.

Therefore, the correct option is a (less than that created by the market, but not zero).

Economics Concept Introduction

Introduction: When the socially marginal costs are equal to the marginal revenue, then it is referred to as the socially optimal level.