Suppose government officials have set an emissions tax to reduce pollution. Assume the optimal tax would be $1,500 but government officials have set the tax equal to $500. At the equilibrium with the $500 tax:
- there will be too much pollution.
- the marginal social cost of pollution will be less than $500.
- the marginal social benefit of pollution will be less than $500.
- the marginal social benefit of pollution will be more than $500.