Chapter 7, Problem 1BCQ

To determine

To explain:

The reason that Microsoft instituted an internal carbon tax to save energy and reduce carbon emission.

Introduction: A carbon tax aims to make individuals and firms pay the full social cost of carbon pollution. In theory, the tax will reduce pollution and encourage more environmentally friendly alternatives. However, critics argue a tax on carbon will increase costs for business and reduce levels of investment and economic growth.

Explanation of Solution

Emission of carbon component from the production process cannot be attainable in short run; therefore to tackle the problem of pollution Microsoft levied internal carbon tax. Microsoft wants to change the production process to reduce the pollution, save energy, and to attain that goal carbon tax is a right policy as compare to the issue a company-wide directive.

The company is trying to reduce pollution, save energy, and use the carbon tax money to improve the environment; this policy will help to improve quality of environment and reduce the pollution.