less than the pollution tax. With a tax of $1,000, the firm has no incentive to reduce pollution more than 30

pounds.

A firm that has to pay a pollution tax will have an incentive to figure out the least expensive technologies for

reducing pollution. Firms that can reduce pollution cheaply and easily will do so to minimize their pollution

taxes; whereas firms that will incur high costs for reducing pollution will end up paying the pollution tax

instead. If the pollution tax applies to every source of pollution, then there are no special favoritism or

loopholes for politically well-connected producers.

For an example of a pollution charge at the household level, consider two ways of charging for garbage
collection. One method is to have a flat fee per household, no matter how much garbage a household produces.
An alternative approach is to have several levels of fees, depending on how much garbage the household
{"creationdate": "2022-12-07T14:15:44-06:00", "file_size_mb": 26.99, "moddate": "2022-12-07T14:23:05-06:00", "total_pages": 597, "file_name": "Microeconomics3e.pdf", "producer": "Prince 14.2 (www.princexml.com)", "file_type": ".pdf", "source_file": "downloads\\business\\economics\\Microeconomics3e.pdf", "creator": "PDFMiner", "file_hash": "830b81f41611ac67a490444dbb5d6aed292224606965b06965b914443c93331a", "uploaded_via": "batch_uploader", "title": "Principles of Microeconomics 3e", "upload_timestamp": "2026-02-07T15:24:38.309401", "source": "downloads\\business\\economics\\Microeconomics3e.pdf", "batch_upload": true}