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A firm that produces chemical solvents creates some air pollution because of the emissions from its ...

A firm that produces chemical solvents creates some air pollution because of the emissions from its manufacturing facilities. A tax is imposed on the firm, equal to the costs of environmental damage caused by a unit of the emissions. What is the result?

• Consumers of the chemical solvents will be willing to pay the full amount of the tax, and so the quantity produced will be unaffected.

• Demand for the chemical solvents will decrease.

• Demand for the chemical solvents will increase.

• The quantity of chemical solvents produced now will be the efficient amount.

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Economics Today: The Micro View

Edition: 19^th

Author: Miller

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