A government is torn between selling annual pollution allowances and setting an annual pollution tax. Unlike in the messy real world, this government is quite certain that it can achieve the same price and quantity either way.

It wants to choose the method that will pull in more government tax revenue. Is selling allowances better for revenues or is setting a pollution tax better, or will both raise exactly the same amount of revenue? (Hint: Recall that tax revenue is a rectangle. Compare the size of the tax rectangle in Figure 10.5 with the most someone will pay for the right to pollute at the efficient level.)  klo5