Suppose that an emissions tax is imposed on all dairy farms in Ontario.This tax would:
A) encourage the dairy farmers to lower prices.
B) increase the level of emissions.
C) reduce the supply of milk in Ontario.
D) increase the supply of milk in Ontario.

Question

Quizplus · Accepted Answer

The imposition of an emissions tax on dairy farms in Ontario would increase the cost of production for the dairy farmers. As a result, farmers would reduce their milk supply, which would drive up the price. The increase in cost of production will encourage dairy farmers to reduce their emissions to avoid paying tax as well. Therefore, an emissions tax would reduce the supply of milk in Ontario.

Suppose That an Emissions Tax Is Imposed on All Dairy