If government imposes on the firms in a polluting industry penalties (taxes) that exceed the actual value of the damages done by the pollution, the result is an inefficient and unfair imposition of costs on those firms and on the consumers of their products. Discuss that statement. Use a graph to show how consumers are harmed.

Question

Want to see more full solutions like this?

Answer 1

Textbook Question

Chapter 16, Problem 1.1P

If government imposes on the firms in a polluting industry penalties (taxes) that exceed the actual value of the damages done by the pollution, the result is an inefficient and unfair imposition of costs on those firms and on the consumers of their products. Discuss that statement. Use a graph to show how consumers are harmed.

Expert Solution & Answer

To determine

Why the imposition of pollution tax of more than the actual value of the damage is unfair.

Explanation of Solution

When firms in the industry that pollute are charged with tax rates of higher value than the actual pollution value caused by the firm, the firm would increase the price of its commodity to make up for the additional cost incurred. Thus, the consumers of the firms have to pay an excessive price for the commodities, which have an adverse impact on the consumers. Efficient pollution taxation is the tax rate which has a penalty equal to the marginal damage cost by the firm. The following diagram shows the optimal pollution taxation:

Principles of Economics (12th Edition), Chapter 16, Problem 1.1P

When the penalty is equal to the marginal damage cost incurred by the polluting firm, the price paid by the consumers for the product would increase. The increase in the price of the commodity of the polluting firm would take place up to the point where the price equals the marginal social cost of the pollution. Excess tax of the marginal social cost would cause the price to increase beyond the marginal social cost, which is an inefficient result.

Economics Concept Introduction

Pollution tax: Pollution tax is a measure adopted by the government to control the pollution by the firms through charging a tax rate for each unit of pollution generated by the firm.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Students have asked these similar questions

In a paragraph, no bullet, points please answer the question and follow the instructions. Give only the solution: Use the Feynman technique throughout. Assume that you’re explaining the answer to someone who doesn’t know the topic at all. 6.Draw a standard Commercial Bank Balance Sheet and briefly explain each of the main components.

C1 The following model can be used to study whether campaign expenditures affect election outcomes: voteA = 0 + B₁ log(expendA) + ẞ₂ log(expendB) + ẞ3 prtystrA + u, where voteA is the percentage of the vote received by Candidate A, expendA and expend are campaign expenditures by Candidates A and B, and prtystrA is a measure of party strength for Candidate A (the percentage of the most recent presidential vote that went to A's party). == (i) (ii) (iii) (iv) What is the interpretation of B₁? In terms of the parameters, state the null hypothesis that a 1% increase in A's expenditures is offset by a 1% increase in B's expenditures. Estimate the given model using the data in VOTE1.DTA and report the results in usual form. Do A's expenditures affect the outcome? What about B's expenditures? Can you use these results to test the hypothesis in part (ii)? Estimate a model that directly gives the t statistic for testing the hypothesis in part (ii). What do you conclude? (Use a two-sided…

In a paragraph, no bullet, points please answer the question and follow the instructions. Give only the solution: Use the Feynman technique throughout. Assume that you’re explaining the answer to someone who doesn’t know the topic at all. 10. What is Tinbergen’s constraint? Explain its importance in regard to US monetary policy.

Answer 2

Textbook Question

Chapter 16, Problem 1.1P

If government imposes on the firms in a polluting industry penalties (taxes) that exceed the actual value of the damages done by the pollution, the result is an inefficient and unfair imposition of costs on those firms and on the consumers of their products. Discuss that statement. Use a graph to show how consumers are harmed.

Expert Solution & Answer

To determine

Why the imposition of pollution tax of more than the actual value of the damage is unfair.

Explanation of Solution

When firms in the industry that pollute are charged with tax rates of higher value than the actual pollution value caused by the firm, the firm would increase the price of its commodity to make up for the additional cost incurred. Thus, the consumers of the firms have to pay an excessive price for the commodities, which have an adverse impact on the consumers. Efficient pollution taxation is the tax rate which has a penalty equal to the marginal damage cost by the firm. The following diagram shows the optimal pollution taxation:

Principles of Economics (12th Edition), Chapter 16, Problem 1.1P

When the penalty is equal to the marginal damage cost incurred by the polluting firm, the price paid by the consumers for the product would increase. The increase in the price of the commodity of the polluting firm would take place up to the point where the price equals the marginal social cost of the pollution. Excess tax of the marginal social cost would cause the price to increase beyond the marginal social cost, which is an inefficient result.

Economics Concept Introduction

Pollution tax: Pollution tax is a measure adopted by the government to control the pollution by the firms through charging a tax rate for each unit of pollution generated by the firm.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 3

Textbook Question

Chapter 16, Problem 1.1P

If government imposes on the firms in a polluting industry penalties (taxes) that exceed the actual value of the damages done by the pollution, the result is an inefficient and unfair imposition of costs on those firms and on the consumers of their products. Discuss that statement. Use a graph to show how consumers are harmed.

Expert Solution & Answer

To determine

Why the imposition of pollution tax of more than the actual value of the damage is unfair.

Explanation of Solution

When firms in the industry that pollute are charged with tax rates of higher value than the actual pollution value caused by the firm, the firm would increase the price of its commodity to make up for the additional cost incurred. Thus, the consumers of the firms have to pay an excessive price for the commodities, which have an adverse impact on the consumers. Efficient pollution taxation is the tax rate which has a penalty equal to the marginal damage cost by the firm. The following diagram shows the optimal pollution taxation:

Principles of Economics (12th Edition), Chapter 16, Problem 1.1P

When the penalty is equal to the marginal damage cost incurred by the polluting firm, the price paid by the consumers for the product would increase. The increase in the price of the commodity of the polluting firm would take place up to the point where the price equals the marginal social cost of the pollution. Excess tax of the marginal social cost would cause the price to increase beyond the marginal social cost, which is an inefficient result.

Economics Concept Introduction

Pollution tax: Pollution tax is a measure adopted by the government to control the pollution by the firms through charging a tax rate for each unit of pollution generated by the firm.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 4

Textbook Question

Chapter 16, Problem 1.1P

If government imposes on the firms in a polluting industry penalties (taxes) that exceed the actual value of the damages done by the pollution, the result is an inefficient and unfair imposition of costs on those firms and on the consumers of their products. Discuss that statement. Use a graph to show how consumers are harmed.

Expert Solution & Answer

To determine

Why the imposition of pollution tax of more than the actual value of the damage is unfair.

Explanation of Solution

When firms in the industry that pollute are charged with tax rates of higher value than the actual pollution value caused by the firm, the firm would increase the price of its commodity to make up for the additional cost incurred. Thus, the consumers of the firms have to pay an excessive price for the commodities, which have an adverse impact on the consumers. Efficient pollution taxation is the tax rate which has a penalty equal to the marginal damage cost by the firm. The following diagram shows the optimal pollution taxation:

Principles of Economics (12th Edition), Chapter 16, Problem 1.1P

When the penalty is equal to the marginal damage cost incurred by the polluting firm, the price paid by the consumers for the product would increase. The increase in the price of the commodity of the polluting firm would take place up to the point where the price equals the marginal social cost of the pollution. Excess tax of the marginal social cost would cause the price to increase beyond the marginal social cost, which is an inefficient result.

Economics Concept Introduction

Pollution tax: Pollution tax is a measure adopted by the government to control the pollution by the firms through charging a tax rate for each unit of pollution generated by the firm.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 5

Textbook Question

Answer 6

Textbook Question

Answer 7

Expert Solution & Answer

To determine

Why the imposition of pollution tax of more than the actual value of the damage is unfair.

Explanation of Solution

When firms in the industry that pollute are charged with tax rates of higher value than the actual pollution value caused by the firm, the firm would increase the price of its commodity to make up for the additional cost incurred. Thus, the consumers of the firms have to pay an excessive price for the commodities, which have an adverse impact on the consumers. Efficient pollution taxation is the tax rate which has a penalty equal to the marginal damage cost by the firm. The following diagram shows the optimal pollution taxation:

Principles of Economics (12th Edition), Chapter 16, Problem 1.1P

When the penalty is equal to the marginal damage cost incurred by the polluting firm, the price paid by the consumers for the product would increase. The increase in the price of the commodity of the polluting firm would take place up to the point where the price equals the marginal social cost of the pollution. Excess tax of the marginal social cost would cause the price to increase beyond the marginal social cost, which is an inefficient result.

Economics Concept Introduction

Pollution tax: Pollution tax is a measure adopted by the government to control the pollution by the firms through charging a tax rate for each unit of pollution generated by the firm.

Answer 8

Expert Solution & Answer

To determine

Why the imposition of pollution tax of more than the actual value of the damage is unfair.

Explanation of Solution

When firms in the industry that pollute are charged with tax rates of higher value than the actual pollution value caused by the firm, the firm would increase the price of its commodity to make up for the additional cost incurred. Thus, the consumers of the firms have to pay an excessive price for the commodities, which have an adverse impact on the consumers. Efficient pollution taxation is the tax rate which has a penalty equal to the marginal damage cost by the firm. The following diagram shows the optimal pollution taxation:

Principles of Economics (12th Edition), Chapter 16, Problem 1.1P

When the penalty is equal to the marginal damage cost incurred by the polluting firm, the price paid by the consumers for the product would increase. The increase in the price of the commodity of the polluting firm would take place up to the point where the price equals the marginal social cost of the pollution. Excess tax of the marginal social cost would cause the price to increase beyond the marginal social cost, which is an inefficient result.

Economics Concept Introduction

Pollution tax: Pollution tax is a measure adopted by the government to control the pollution by the firms through charging a tax rate for each unit of pollution generated by the firm.

Answer 9

Expert Solution & Answer

Answer 10

Expert Solution & Answer

Answer 11

To determine

Why the imposition of pollution tax of more than the actual value of the damage is unfair.

Answer 12

Explanation of Solution

When firms in the industry that pollute are charged with tax rates of higher value than the actual pollution value caused by the firm, the firm would increase the price of its commodity to make up for the additional cost incurred. Thus, the consumers of the firms have to pay an excessive price for the commodities, which have an adverse impact on the consumers. Efficient pollution taxation is the tax rate which has a penalty equal to the marginal damage cost by the firm. The following diagram shows the optimal pollution taxation:

Principles of Economics (12th Edition), Chapter 16, Problem 1.1P

When the penalty is equal to the marginal damage cost incurred by the polluting firm, the price paid by the consumers for the product would increase. The increase in the price of the commodity of the polluting firm would take place up to the point where the price equals the marginal social cost of the pollution. Excess tax of the marginal social cost would cause the price to increase beyond the marginal social cost, which is an inefficient result.

Answer 13

Economics Concept Introduction

Pollution tax: Pollution tax is a measure adopted by the government to control the pollution by the firms through charging a tax rate for each unit of pollution generated by the firm.

Answer 14

Ch. 16 - If government imposes on the firms in a polluting...Ch. 16 - Prob. 1.2P Ch. 16 - Prob. 1.3P Ch. 16 - A paper factory dumps polluting chemicals into the...Ch. 16 - Prob. 1.6P Ch. 16 - Prob. 1.7P Ch. 16 - Prob. 1.8P Ch. 16 - Prob. 1.9P Ch. 16 - Prob. 1.10P Ch. 16 - Prob. 1.11P

Videos

Explanation of Solution

Want to see more full solutions like this?

Chapter 16 Solutions