-If the government taxes producers that create pollution, the government's policy
A) forbids the firms from passing along higher costs.
B) results in less production because the producers' costs have risen.
C) eliminates pollution entirely by shifting the supply curve leftward.
D) allows the firms to pass along higher costs but doesn't cut pollution.
E) allows the producers to pollute more by increasing their costs.

Question

-If the government taxes producers that create pollution, the government's policy
A) forbids the firms from passing along higher costs. 
B) results in less production because the producers' costs have risen. 
C) eliminates pollution entirely by shifting the supply curve leftward. 
D) allows the firms to pass along higher costs but doesn't cut pollution. 
E) allows the producers to pollute more by increasing their costs.

Quizplus · Accepted Answer

Taxing producers for creating pollution increases their costs of production. This typically leads to less production because the higher costs make it less profitable or more expensive to produce at previous levels. The tax doesn't forbid firms from passing costs to consumers, doesn't eliminate pollution entirely, doesn't allow firms to pollute more, and doesn't guarantee that firms can pass along costs without affecting production levels.

-If the Government Taxes Producers That Create Pollution, the Government's