It is the custom for paper mills located alongside the Layzee River to discharge waste products into the river. As a result, operators of hydroelectric power-generating plants downstream along the river find that they must clean up the river's water before it flows through their equipment. Refer to the above information. Which of the following policies would be most appropriate for dealing with this problem?
A) Levy a tax on the consumers of paper products and use the tax revenues to conduct research on new energy sources
B) Levy a tax on the consumers of electricity and use the tax revenues to subsidize the consumers of paper products
C) Levy a tax on the producers of electricity and use the tax revenues to clean up the river
D) Levy a tax on the producers of paper products and use the tax revenues to clean up the river

Question

Quizplus · Accepted Answer

The most appropriate policy would be to levy a tax on the producers of paper products and use the tax revenues to clean up the river. This approach would create a financial disincentive for paper mills to discharge waste into the river, while also providing a source of funding for the cleanup efforts of downstream hydroelectric power-generating plants. Additionally, it is fair to hold the producers of paper products accountable for their impact on the environment rather than placing the burden on consumers or electricity producers.

It Is the Custom for Paper Mills Located Alongside the Layzee