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A difficulty with using a uniform per-unit tax to address a negative externality

ID: 1208493 • Letter: A

Question

A difficulty with using a uniform per-unit tax to address a negative externality is that

the social cost of pollution might vary across geographic regions.

the tax will reduce output.

the social cost of pollution should not be assessed on the consumers, but should be assessed on the firms.

the tax will increase price.

the social cost of pollution might vary across geographic regions.

the tax will reduce output.

the social cost of pollution should not be assessed on the consumers, but should be assessed on the firms.

the tax will increase price.

Explanation / Answer

A difficulty with using a uniform per-unit tax to address a negative externality is that;

(c) the social cost of pollution should not be assessed on the consumers, but should be assessed on the firms.

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