Answer the following statement(s) true (T) or false (F)

Question

1. A Pigouvian tax is a charge on a good whose production generates a negative externality, such that the charge isequal to the MEC at the competitive output level.
2. In the single-polluter case, a firm faced with an emission charge for pollution implemented as a marginal tax (MT) will abate as long as MAC 3. In the multiple-polluter case, each firm faced with an emission charge implemented as a marginal tax (MT) abates up to the point where MAC equals MT, which results in a cost-effective solution.
4. If firms abate to the point where each firm’s MAC equals the marginal tax, an efficient solution will result.
5. Of all the market-based policy instruments used to combat environmental damage, the pollution charge is the most commonly used worldwide.

Answer 1

1. False
2. True
3. True
4. False
5. True