The idea behind the pollution tax equal to the external cost per unit of pollution is to __________.

increase the social benefit to be above the marginal cost

internalize the externality

allow the firm to evade external costs

drive polluting firms out of developed countries

I say D

I'm sorry, your answer is incorrect. The correct answer is B) internalize the externality. The idea behind the pollution tax equal to the external cost per unit of pollution is to internalize the externality, which means that the polluting firm would have to pay for the cost it imposes on society through pollution. By doing so, the tax aims to align the private cost of pollution with the social cost, effectively reducing pollution levels and encouraging firms to find cleaner and more efficient alternatives.

It seems like you have selected option D, which states that the idea behind the pollution tax equal to the external cost per unit of pollution is to drive polluting firms out of developed countries. Let's evaluate whether this answer choice is correct.

To determine the correct answer, let's analyze each option:

A. Increase the social benefit to be above the marginal cost: While the pollution tax may indirectly lead to increased social benefits by reducing pollution and its associated costs, this is not the primary objective of the tax.

B. Internalize the externality: This option is correct. The main purpose of a pollution tax is to internalize the external costs of pollution. By taxing polluting activities according to their external costs, the tax aligns private incentives with social costs and encourages firms to internalize the negative externalities they impose.

C. Allow the firm to evade external costs: This option is incorrect. The pollution tax is specifically designed to make firms accountable for the external costs generated by their pollution. It is not intended to allow them to evade these costs.

D. Drive polluting firms out of developed countries: This option is incorrect. While a pollution tax may lead to changes in the behavior of firms, such as reduced pollution levels or investments in cleaner technologies, its primary goal is not to drive companies out of developed countries.

Based on the analysis, the correct answer is option B: to internalize the externality.