2 Excise taxes are sometimes used for pollution control. Referring back to Chapter 5 and the analysis of taxes to control negative externalities, draw a diagram that involves a tax on textiles in order to incorporate the social costs of water pollution resulting from the chemicals used in the production process. Assume that supply is highly but not perfectly elastic and that demand is moderately elastic. Using the diagram as a starting point, analyze the short-run and possible long-run effects of this tax on:

(a) price of textiles

(b) quantity of textiles purchased/sold and tax base

(c) tax revenue from this particular tax

(d) the amount of water pollution

(e) deadweight loss

(f ) distribution of the tax burden between customer and supplier

(g) other possible effects (e.g., shift to alternative production processes)