Question

the city council again wants to reduce total emissions down to 2 tons of smoke per day. this time the city council sets a tax of $t per day on each ton of smoke emitted. how large will t have to be to reduce total emissions down to 2 tons of smoke per day? specifically, what is the smallest whole dollar tax on each ton of smoke emitted that will guarantee that total emissions fall to 2 tons per day? under this tax, what production process will each firm choose? if the revenue collected from taxing emissions is used to offset other taxes, then what will be the total cost to society of this policy? t would have to be

Answer 1

The smallest whole dollar tax on each ton of smoke emitted that will guarantee total emissions fall to 2 tons per day will be $2.

Step-by-step explanation:

In order to reduce total emissions down to 2 tons of smoke per day, the city council sets a tax of $t per day on each ton of smoke emitted. The smallest whole dollar tax on each ton of smoke emitted that will guarantee total emissions fall to 2 tons per day will be $2. The firms will choose to reduce pollutants until the marginal cost of reducing pollution is equal to the pollution tax.

Assuming the revenue collected from taxing emissions is used to offset other taxes, the total cost to society of this policy would be the revenue collected from the tax minus the reduction in pollution damage.

The primary topic of this question is pollution taxation and its impact on reducing emissions.