Explain how a specific tax equal to the marginal harm of pollution can increase or decrease total welfare in a monopoly market
What will be an ideal response?
If the monopoly is producing more output and pollution than the social optimum, then a specific tax equal to the marginal harm of pollution will increase total welfare. However, a monopoly may produce less output and thus pollution than is socially optimal. If this is the case, then a tax will decrease output more and lower welfare.
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The largest component of national income is:
A) compensation of employees B) proprietor's income C) rental income D) corporate profits
A television report states: "The Federal Reserve will lower the discount rate for the fourth time this year." This report indicates that the Federal Reserve is most likely trying to:
A. Reduce inflation B. Save the banking industry C. Stimulate the economy D. Improve the savings rate