A problem with pollution charges or taxes as a solution to ...

[nenivikky]

A problem with pollution charges or taxes as a solution to pollution is that
 
  A) people don't want the government to regulate industry.
  B) the necessary information about the polluting industry is costly and usually unavailable.
  C) taxes are already too high.
  D) pollution would still continue.
  E) the producers do not want the property right to their pollution.

Question 2

What are the effects of a tariff on a good on various groups and on the total surplus in the country that imposes the tariff?
 
  What will be an ideal response?

[SeanoH09]

Answer to Question 1

B

Answer to Question 2

Imposition of a tariff increases the price of the good in the importing country and makes sellers better off. Domestic sellers enjoy a greater surplus. Consumers have to pay a higher price for the imported good, so they are made worse off. The government earns revenue equal to the product of the tariff rate and the number of units of the good imported. Overall, due to the imposition of the tariff there is a fall in the total surplus compared to the pre-tariff situation. The loss in total surplus is referred to as the deadweight loss of the tariff.