Taxing production is one way to get firms to produce the socially efficient level of a waste-generating good.

Question

Quizplus · Accepted Answer

Taxing production of a waste-generating good increases the cost of production for firms, thus providing an incentive to reduce production or invest in cleaner technologies. This ultimately encourages firms to produce at a level that aligns with the socially optimal level of waste generation.

Taxing Production Is One Way to Get Firms to Produce