A pollution charge gives the trucking industry an incentive to reduce its emissions, as long as the ______________________ of reducing the emissions is ______________________.

Question

BlackTom AI · Accepted Answer

The question describes how a pollution charge influences the trucking industry’s decisions to reduce emissions, and it asks for the condition under which there is an incentive to reduce emissions.
Option 1: 'total cost; less than the tax' suggests firms compare total cost of emissions reduction to the tax. In environmental economics, decisions are driven by marginal costs and marginal incentives, not by total cost comparisons, so this framing is misleading.
Option 2: 'total cost; equal to the social cost' ties the total cost of abatement to the social cost, which is not the standard comparative metric used in tax-induced abatement; the equalization condition is not how a per-unit tax functions in practice.
Option 3: 'marginal cost; less than the tax' captures the correct mechanism. A pollution tax per unit creates an incentive to reduce emissions as long as the marginal cost of reducing one more unit of pollution (the marginal abatement cost) is less than the tax per unit. Abatement continues until MAC rises to meet the tax level, so MAC < tax means there is still room to profitably abate.
Option 4: 'marginal cost; equal to the social cost' would describe a precise efficiency condition in some contexts, but with a per-unit tax, the relevant trigger for abatement is MAC vs the tax, not MAC equal to the social cost. This option confuses the targeted policy benchmark (the tax) with a theoretical equality condition that isn’t the operational incentive under a tax mechanism.

A pollution charge gives the trucking industry an incentive to reduce its emissions, as long as the of reducing the emissions is .

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