Explain how a pollution tax is different from a Pigouvian tax. Discuss how incentives for firms differ under the two types of taxes, and what would be required of the government if it were to structure a Pigouvian tax system to mimic the effects of a pollution tax.
What will be an ideal response?
A pollution tax imposes a tax on each unit of pollution that is emitted as a firm produces. A Pigouvian tax is a per-unit tax on the good that is being produced. In a particular market, a pollution tax can be set to result in the same decrease in output as an efficient Pigouvian tax -- but the pollution tax gives an incentive for firms to implement pollution abating technologies in production, whereas the Pigouvian tax gives no such incentive unless the government keeps re-setting the Pigouvian tax each time a firm implements pollution abating technologies.
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When foreign investors in Thailand began to realize that Thailand could not maintain its peg to the dollar indefinitely, they began to ________ in Thailand and exchange ________. This change in investment by foreigners is termed capital flight
A) purchase more investments; dollars for baht to purchase these investments B) sell off their investments; the dollars they received for baht C) purchase more investments; baht for dollars to purchase these investments D) sell off their investments; the baht they received for dollars
If you observed that the market price of a good rose, while the quantity exchanged fell, which of the following could have caused the change? a. An increase in supply. b. A decrease in supply
c. An increase in demand. d. A decrease in demand.