POLLUTION REDUCTION - A PEDAGOGIC NOTE

The paper presents a new graphical analysis of how a profit maximizing firm will respond when required to control pollution. The focus is on graphical presentations which attempt to integrate the two pollution reduction responses open to the firm: output reduction, and use of aba tement technology. We argue that existing approaches are deficient, fa iling to accurately illustrate the firm's optimal pollution reduction response. An alternative graphical presentation, using families of iso profit, iso pollution, and iso tax expenditure curves is developed wh ich successfully illustrates the optimal response.