Question

The greater the magnitude of the external costs of production,

	a.	​ The larger is the deadweight loss from overproduction.
	b.	​ The greater would be the optimal pollution tax.
	c.	​ The further the private market solution ignoring those costs would deviate from the socially efficient level of output.
	d.	​ All of the above are true.

Answer 1

The greater the magnitude of the external costs of production,All of the above are true.

d. ​ All of the above are true.

Explanation:

d. ​ All of the above are true.

Whereby for; A. The larger is the deadweight loss from overproduction;

It explains the overproduction can be produced when the magnitude of the external production is increased beyond the limit of cost of production hence causing deadweight loss due to the availability of external costs.

b. The greater would be the optimal pollution tax;

In that the greater magnitude enhances the chances of tax more than the optimal or standard tax requirements in the production costs which are influenced by external magnitude of costs of production increase.

c.The further the private market solution ignoring those costs would deviate from the socially efficient level of output;

Whereby the higher magnitude of the external costs of production ensures that the costs of production are neglected in the private market solution because there are sufficient external costs which boosts the production hence causing deviation of the efficient output level in private methods of production,