A New Pollution Regulation Allows for an Interest Subsidy to Firms

Multiple Choice

A new pollution regulation allows for an interest subsidy to firms that borrow funds to
Install pollution control devices. Thus, borrowing costs are zero for the firms. In addition, the new regulation also allows for a waiver in the sales tax to firms that purchase
Pollution control devices. In his calculation, should an economist include sales tax and interest cost in the cost of the regulation?

A) Include both.
B) Exclude both.
C) Include sales tax, but exclude interest cost.
D) Include interest cost, but exclude sales tax.