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    Why charge on a marginal basis?

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    If a fixed number of industrial polution permits are marketable, then we should just sell the right to smoke to the highest bidders rather than ban smoking outright in many cities, towns, business outlets, restaurants, and bars. It would reduce the economic losses and make the market more efficient.

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    Consider this example, a firm pollutes the air and every unit of waste the firm generates costs the society $10 to clean up. If the government sells the right to smoke (for let's say $1000/year), then this firm may purchase that ...

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    Why charge on a marginal basis?