Question

The government has decided to take action to reduce the pollution caused by the chemical industry. The industry is composed of profit-maximizing, perfectly competitive firms. a. Identify 1 policy that the government could implement to reduce pollution. b. Explain the effect the policy you identified in part a will have on each of the following for the firms in the chemical industry-marginal cost, output & price.

Answer 1

Answer:

a. In order to reduce pollution government can implement policies to clean the rivers or reduce carbon emissions to protect the environment. Carbon permits are their for companies to reduce their carbon emissions where as in case of polluting rivers government can regulate companies to find land filling sites to reduce pollution

b. The impact of regulation would be increase in the marginal cost. Output would be reduced based on the permit limits set for the chemical industry.

The increase in price of product is generally transferred upon the consumer.