Figure 10-18. The graph represents a corrective tax to reduce pollution. On the axes, Q denotes the quantity of pollution and P represents the price of pollution.
-Refer to Figure 10-18. The line labeled "Corrective tax" could accurately be re-labeled as
A)"Demand for clean air."
B)"Demand for pollution rights."
C)"Price of pollution."
D)"Rate of subsidy."

Question

Figure 10-18. The graph represents a corrective tax to reduce pollution. On the axes, Q denotes the quantity of pollution and P represents the price of pollution. 
-Refer to Figure 10-18. The line labeled "Corrective tax" could accurately be re-labeled as
A)"Demand for clean air." 
B)"Demand for pollution rights." 
C)"Price of pollution." 
D)"Rate of subsidy."

Quizplus · Accepted Answer

The line labeled "Corrective tax" represents the price of pollution, which is the amount of money that must be paid per unit of pollution emitted. As the price of pollution increases, the quantity of pollution decreases, as indicated by the downward-sloping line. This is the basic mechanism by which a corrective tax reduces pollution.