An emission fee levied against polluting ﬁrms will tend to shift the
A) supply curve of the ﬁrms to the left.
B) supply curve of the ﬁrms to the right.
C) demand curve for the product to the left.
D) demand curve for the product to the right.

Question

Quizplus · Accepted Answer

An emission fee is a type of tax that is placed on firms emitting pollutants. The tax increases the cost of production for the firms, and this increase in cost is likely to lead to a decrease in supply. Thus, the supply curve for the firms will shift to the left. This is because the firms are likely to reduce their output, given that it now costs them more to produce the same amount. The demand curve for the product is unlikely to be affected directly by the emission fee, and so it is not a relevant factor in the analysis.

An Emission Fee Levied Against Polluting ﬁRms Will Tend to Shift