Suppose That an Industry Emits a Chemical That Pollutes the Ground

Multiple Choice

Suppose that an industry emits a chemical that pollutes the ground water. Without considering the effects of the pollution, the industry has a marginal private cost curve of $M P C = Q + 30$ . The market demand curve is $P = 60 - Q$ , while the marginal social cost curve is $\mathrm { MSC } = 2 \mathrm { Q } + 30$ . How can the optimal level of emissions fee best be depicted on a graph in this problem?

A) The optimal fee shifts down the marginal private cost of production until it intersects demand at the socially optimal output level.
B) The optimal fee shifts the demand curve out until it intersects the marginal private cost of production at the socially optimal level of production.
C) The optimal fee establishes a maximum level of output at the socially optimal level of production.
D) The optimal fee shifts the marginal private cost of production up until it intersects the demand curve at the socially optimal level of production.