Share
Explore BrainMass

Per-Unit Tax on the Firm's Output for Saving Environment

The manager of a paper mill is preparing for her most important test yet. On Tuesday morning, she must testify before a senate committee to "justify" the firm's high price. One Senator is particularly angry with the firm because its price is twice the firm's marginal cost. On Tuesday afternoon, the manager is scheduled to appear before the House Subcommittee on the Environment to explain why the firm should not be slapped with a per-unit tax on the firm's output to compensate for the pollution it discharges into a major river. What do you think will be the manager's game plan?

Solution Preview

Explain why the firm should not be slapped with a per-unit tax on the firm's output to compensate for the pollution it discharges into a major river. What do you think will be the manager's game plan?
Pollution that the organizaiton discharges is an extrernality. 'Externalities' is the economic term for the costs (e.g. environmental and social) of an economic activity which are not borne by the operator, but instead by the wider community. Another example can be if a forestry operation contributes to species loss or habitat destruction and these ...

Solution Summary

This explains the impact of per-unit tax on the firm's output for saving environment

$2.19