If the government taxes producers that create pollution,the government's policy
A) allows the producers to pollute more by increasing their 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) forbids the firms from passing along higher costs.

Question

Quizplus · Accepted Answer

The government's policy of taxing producers that create pollution would increase their costs, which would lead to a reduction in the profit margin. Thus, firms would reduce production or find more efficient ways of production. However, the policy does not eliminate pollution entirely, nor does it allow firms to pass along higher costs.

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