Efficiency of Input vs. Output Taxes
A factory's production process uses a specific chemical that pollutes a nearby river. To address this, a regulator is considering two policies: a tax on each unit of the final product made by the factory, or a tax on each liter of the polluting chemical used. Explain why the tax on the chemical is likely to be a more efficient solution. In your explanation, focus on the different incentives each tax provides to the factory.
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CORE Econ
Economy
Economics
Introduction to Microeconomics Course
The Economy 2.0 Microeconomics @ CORE Econ
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Efficiency of Input vs. Output Taxes
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Superiority and Mechanism of an Input Tax in the Chlordecone Case