The government of a small town is concerned about the litter created when people leave styrofoam cups used to serve large beverages on the ground. The government decides to tax these by implementing a $\$ 1$ tax on these drinks.

What is the most likely purpose of this tax?
Choose 1 answer:
(A) Reduce the number of beverages sold in styrofoam cups
(B) Raise tax revenue for a new park
(C) Encourage people to throw the cups away
(D) Reward sellers of this good
(E) Increase the demand for these drinks

Question

The government of a small town is concerned about the litter created when people leave styrofoam cups used to serve large beverages on the ground. The government decides to tax these by implementing a $\$ 1$ tax on these drinks.

What is the most likely purpose of this tax?
Choose 1 answer:
(A) Reduce the number of beverages sold in styrofoam cups
(B) Raise tax revenue for a new park
(C) Encourage people to throw the cups away
(D) Reward sellers of this good
(E) Increase the demand for these drinks

Accepted Answer

∻Solution∻ ‖ a ⋮ Tax Purpose: The government implements a tax on styrofoam cups to reduce litter. ‖ ‖ b ⋮ Behavioral Change: By increasing the cost of beverages in styrofoam cups, the government aims to discourage their use and encourage proper disposal. ‖ ∻Answer∻ ⚹ (C) Encourage people to throw the cups away ⚹ ∻Key Concept∻ ⚹ Pigovian Tax ⚹ ∻Explanation∻ ⚹ A Pigovian tax is imposed to correct the negative externalities, such as littering, by incentivizing individuals to change their behavior. In this case, the tax on styrofoam cups is intended to reduce litter by encouraging people to dispose of the cups properly. ⚹◊How will the $1 tax on styrofoam cups used to serve beverages impact the equilibrium price and quantity of these drinks in the market?⍭ Generate me a similar question◊

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