It Is the Custom for Paper Mills Located Alongside the Layzee

question 119

Multiple Choice

It is the custom for paper mills located alongside the Layzee River to discharge waste products into the river. As a result, operators of hydroelectric power-generating plants downstream along the river find that they must clean up the river's water before it flows through their equipment.Refer to the above information. Which of the following policies would be most appropriate for dealing with this problem?

• A)levy a Pigovian tax on the consumers of paper products and use the tax revenues to conduct research on new energy sources
• B)levy a Pigovian tax on the consumers of electricity and use the tax revenues to subsidize the consumers of paper products
• C)levy a Pigovian tax on the producers of electricity and use the tax revenues to clean up the river
• D)levy a Pigovian tax on the producers of paper products and use the tax revenues to clean up the river

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