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.

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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.

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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.

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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.

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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.

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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

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