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?