Government revenue is area b + c + f. The deadweight loss (DWL) of the tax is d + g (poof!). However, the avoided external cost is equal to d + e + g. Therefore, the net benefit of the environmental regulation is d + e + g - d - g = e > 0 (MEC - DWL). A benefit-cost analysis would indicate that the pollution tax is an efficient policy...
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A benefit-cost analysis would indicate that the pollution tax is an efficient policy. Now imagine that the environmental policy is command and control (and assume that abatement costs of command and control are the minimum abatement costs): firms are required to use a clean technology. In this case the producer surplus becomes area b and area c + f + h is simply the higher production costs associated with pollution abatement: the increased capital and labor devoted to pollution reduction...
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Alcohol Dependency Alcohol abuse kills thousands every year. The best way to avoid these health problems asociated with alcohol is to not drink at all.	2 / 290
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