Problem Three: Different methods to reduce pollution- regulation and taxation. Consider a case where there are two firms and a regulator wants to half pollution from those firms. The regulator can use either a Pigouvian tax to reduce pollution or pass a law requiring firms to half their pollution output. If the two firms are identical (same marginal benefit to polluting and same private marginal costs), does it matter which the regulator does? If the two firms have different marginal benefits of polluting, does it matter? Explain.

Problem Three: Different methods to reduce pollution- regulation and taxation. Consider a case where there are two firms and a regulator wants to half pollution from those firms. The regulator can use either a Pigouvian tax to reduce pollution or pass a law requiring firms to half their pollution output. If the two firms are identical (same marginal benefit to polluting and same private marginal costs), does it matter which the regulator does? If the two firms have different marginal benefits of polluting, does it matter? Explain.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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