Considering that all firms have identical constant long-run average costs before the sales tax-subsidy policy, what do you assume to happen to the price of product, the output of every firms, and industry output, in the short run & the long run? (Hint: How does price associate to industry input?) Can such policy always be obtained with balanced budget where in tax revenues are equal to subsidy payments? Why?Clarify .
As the polluters exit and non-polluters enter the industry, revenues from polluters drop and the subsidy to the non-polluters raise. This imbalance takes place while the first polluter leaves the industry and persists ever after.