Question

It is the custom for paper mills located alongside the Layzee River to discharge waste products into the river. As a result, operators of hydroelectric power-generating plants downstream along the river find that they must clean up the river's water before it flows through their equipment. Refer to the above information. Which of the following policies would be most appropriate for dealing with this problem?

a.Levy a tax on the consumers of paper products and use the tax revenues to conduct research on new energy sources
b.Levy a tax on the consumers of electricity and use the tax revenues to subsidize the consumers of paper products
c.Levy a tax on the producers of electricity and use the tax revenues to clean up the river
d.Levy a tax on the producers of paper products and use the tax revenues to clean up the river

Answer 1

The best option is to levy a tax on the producers of paper products and use the tax revenues to clean up the river. Option D

Explanation: It is only fair that the perpetrators of the pollution of the Layzee River be fined or taxed as the case may be.

This tax will achieve two things:

1. It will stop them from polluting the River and seek other better ways of disposing their waste.

2. The revenues gotten from the tax will be used to clean up the river, instead of making the hydroelectric power generating plants bear the costs.