Suggest a remedial product-tax measure for each of the following externalities if: (1) the whole world had only one government and (2) a particular nation is harmed and is acting alone. The individual situations, (a. - c.), are as follows:a. Domestic pollution from domestic consumption of a productb. Domestic pollution from foreign consumption of a productc. Global pollution from world consumption of a product
What will be an ideal response?
POSSIBLE RESPONSE:
a. If the whole world had one government, it should tax domestic consumption. The same remedial measure would apply if this country is harmed by the pollution and is acting alone.
b. If the whole world had one government, the remedial measure should be to tax foreign consumption. If this particular nation acts alone, then the product-market prescription should be to tax the nation's domestic exports of this product.
c. If the whole world had one government, it should tax world consumption. If a particular nation acts alone then the product-market prescription should be to tax the nation's exports as well as its domestic consumption.
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