Suppose the Government Imposes a Tax for Each Unit of Pollution

Multiple Choice

Suppose the government imposes a tax for each unit of pollution that a firm produces.The firm will

A) stop producing altogether.
B) reduce emissions until the marginal cost of any further reduction in pollution is equal to or greater than the tax.
C) reduce emissions until the marginal cost of any further reduction in pollution is equal to the price of the firm's product.
D) increase output such that the additional revenue can offset this additional tax payment.
E) ignore the tax and continue to produce the same amount of output.