Consider the market for pollution reduction within the dumping of Nuclear Leakage into public water context....

 

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Consider the market for pollution reduction within the dumping of Nuclear Leakage into public water context. Below, MC2 is the firms' true marginal cost of reduction, and MC1 is the government's best guess at pollution reduction. Suppose the government decides to implement a tax that would yield their best guess at the optimal pollution reduction. What inefficiency would arise from such a policy? Cost of pollution reduction ($) (b) Nuclear leakage MC2 DWL2 MC1 C DWL1 t = C Reduction 0 MD = SMB Ru Consider the market for pollution reduction within the dumping of Nuclear Leakage into public water context. Below, MC2 is the firms' true marginal cost of reduction, and MC1 is the government's best guess at pollution reduction. Suppose the government decides to implement a tax that would yield their best guess at the optimal pollution reduction. What inefficiency would arise from such a policy? Cost of pollution reduction ($) (b) Nuclear leakage MC2 DWL2 MC1 C DWL1 t = C Reduction 0 MD = SMB Ru