(a) Relative to the no-regulation status quo, what is the efficiency gain that would result
from this tax. Delineate and refer to relevant sections of the diagram. With reference
to the diagram, explain why this tax fails to maximize the potential efficiency gains.
3. The diagram at the right shows, for a given chemical plant, the plant’s marginalbenefits associated with toxic chemical emissions (MBE) and society’s marginalenvironmental damages stemming from those emissions (SMCE). The government isconsidering imposing an emissions taX at the rate of l per unit of emissions, as indicatecin the diagram. 6(2) e(1) e(0)
