The previous analysis hinges on the government having good information regarding either the demand for pollution permits or the optimal level ofpollution (or both). Given that the appropriate policy (tradable permits or corrective taxes) can depend on the available information and the policygoal, consider the following scenario.An environmental study conducted in a particular city suggests that if a chemical plant emits more than 70 million tons of chemicalseach year, the water supply will become contaminated beyond the point where filtration techniques can make it safe for drinking.If this is all the information the government has, which solution to reduce pollution is appropriate? Check all that apply.O Tradable permitsO Corrective taxes Paper factories emit chemicals as a waste product. This generates a cost to society that is not paid for by the firm; therefore, pollution is a negativeexternality of paper production. Suppose the U.S. government wants to correct this market failure by getting firms to internalize the cost of pollution.To do this, the government can charge firms for pollution rights (the right to emit a given quantity of chemicals). The following graph shows thedaily demand for pollution rights.Use the graph input tool to help you answer the following questions. You will not be graded on any changes you make to this graph.Note: Once you enter a value in a white field, the graph and any corresponding amounts in each grey field will change accordingly.Graph Input Tool80Daily Demand for Pollution Rights72I Price(Dollars per ton)864QuantityDemanded36056(Millions of tons)48403224Demand1684080 120 160 200 240 280 320 360 400QUANTITY (Millions of tons)Suppose the government has determined that the socially optimal quantity of chemical pollution is 160 million tons per day.One way governments can charge firms for pollution rights is by imposing a per-unit tax on emissions. A tax (or price in this case) of Sper tonof chemicals emitted will achieve the desired level of pollution.Now suppose the U.S. government does not know the demand curve for pollution and, therefore, cannot determine the optimal tax to achieve thedesired level of pollution. Instead, it auctions off tradable pollution permits. Each permit entitles its owner to emit one ton of chemicals per day. Toachieve the socially optimal quantity of pollution, the government auctions off 160 million pollution permits. Given this quantity of permits, the pricefor each permit in the market for pollution rights will be $PRICE (Dollars per ton)

The curve that depicts various quantities of goods and services being demanded by customers at…

Suppose the government has determined that the socially optimal quantity of chemical pollution is 160 million tons per day. One way governments can charge firms for pollution rights is by imposing a per-unit tax on emissions. tax (or price in this case) of S per ton of chemicals emitted will achieve the desired level of pollution. Now suppose the U.S. government does not know the demand curve for pollution and, therefore, cannot determine the optimal tax to achieve the desired level of pollution. Instead, it auctions off tradable pollution permits. Each permit entitles its owner to emit one ton of chemicals per day. To achieve the socially optimal quantity of pollution, the government auctions off 160 million pollution permits. Given this quantity of permits, the price for each permit in the market for pollution rights will be $

Suppose the government has determined that the socially optimal quantity of chemical pollution is 160 million tons per day. One way governments can charge firms for pollution rights is by imposing a per-unit tax on emissions. tax (or price in this case) of S per ton of chemicals emitted will achieve the desired level of pollution. Now suppose the U.S. government does not know the demand curve for pollution and, therefore, cannot determine the optimal tax to achieve the desired level of pollution. Instead, it auctions off tradable pollution permits. Each permit entitles its owner to emit one ton of chemicals per day. To achieve the socially optimal quantity of pollution, the government auctions off 160 million pollution permits. Given this quantity of permits, the price for each permit in the market for pollution rights will be $

Essentials of Economics (MindTap Course List)

8th Edition

ISBN:9781337091992

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter10: Externalities

Section10.1: Externalities And Market Inefficiency

Problem 1QQ

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There are three identical firms in Happy Valley. Firms Initial Pollution Level Cost of Reducing Pollution by 1 unit A 30 units $20 B 40 units $30 C 20 units $10 The government wants to reduce total pollution to 60 units, so it gives each firm 20 tradable permits. Who sells permits and how many do they sell? Who buys permits and how many do they buy? Briefly explain why the sellers and buyers are each willing to do so? What is the total cost of pollution reduction in this situation? How much larger would the cost of pollution reduction be if the permits could not be traded?
Nuclear facilities emit radioactive waste as a waste product. This generates a cost to society that is not paid for by the firm; therefore, pollution is a negative externality of electricity production. Suppose the U.S. government wants to correct this market failure by getting firms to internalize the cost of pollution. To do this, the government can charge firms for pollution rights (the right to emit a given quantity of radioactive waste). The following graph shows the daily demand for pollution rights.
Power stations emit sulfur dioxide as a waste product. This generates a cost to society that is not paid for by the firm; therefore, pollution is a negative externality of power production. Suppose the U.S. government wants to correct this market failure by getting firms to internalize the cost of pollution. To do this, the government can charge firms for pollution rights (the right to emit a given quantity of sulfur dioxide). The following graph shows the daily demand for pollution rights. 1) Suppose the government has determined that the socially optimal quantity of sulfur dioxide emissions is 350 million tons per day. One way governments can charge firms for pollution rights is by imposing a per-unit tax on emissions. A tax (or price in this case) of $............per ton of sulfur dioxide emitted will achieve the desired level of pollution. 2) Now suppose the U.S. government does not know the demand curve for pollution and, therefore, cannot determine the optimal tax to…
Power stations emit sulfur dioxide as a waste product. This generates a cost to society that is not paid for by the firm; therefore, pollution is a negative externality of power production. Suppose the U.S. government wants to correct this market failure by getting firms to internalize the cost of pollution. To do this, the government can charge firms for pollution rights (the right to emit a given quantity of sulfur dioxide). The following graph shows the daily demand for pollution rights. Use the graph input tool to help you answer the following questions. You will not be graded on any changes you make to this graph. Note: Once you enter a value in a white field, the graph and any corresponding amounts in each grey field will change accordingly. Graph Input Tool (? Daily Demand for Pollution Rights 70 I Price (Dollars per ton) 63 7 56 Quantity Demanded 270 49 (Millions of tons) 42 35 28 21 Demand 14 7 90 120 150 180 210 240 270 300 QUANTITY (Millions of tons) 30 60 PRICE (Dollars per…
Power stations emit sulfur dioxide as a waste product. This generates a cost to society that is not paid for by the firm; therefore, pollution is a negative externality of power production. Suppose the U.S. government wants to correct this market failure by getting firms to internalize the cost of pollution. To do this, the government can charge firms for pollution rights (the right to emit a given quantity of sulfur dioxide). The following graph shows the daily demand for pollution rights. Use the graph input tool to help you answer the following questions. You will not be graded on any changes you make to this graph. Note: Once you enter a value in a white field, the graph and any corresponding amounts in each grey field will change accordingly. Graph Input Tool Daily Demand for Pollution Rights 81 IPrice (Dollars per ton) Quantity Demanded (Millions of tons) 72 63 315 Demand 35 70 106 140 175 210 245 0 215 190 QUANTITY (Mlons of tons Suppose the government has determined that the…
Marginal Abatement Costs: The marginal abatement costs of three firms are provided in the table below on page 109. Each firm is emitting now 10 tons/week. Therefore, the total emission of all firms is 30 tons/week. Suppose that society wants to reduce the level of emission by 50%, to 15 tons/week. Calculate the total cost of reducing the level of emission to 15 tons/week Assuming equiproportionate decrease in emissions which of the following is correct: 69 96 100 Assuming equimarginal decrease in emissions which of the following is correct: 69 96 100
What is an externality in economics? Explain how a neighbor’s barking dog could be both a positive and a negative externality. Can pollution ever make us better off? How do we know? Should we aim to eliminate all pollution? If not, what should our goal be? Defend your answer. When thinking about types of goods, what does rivalry mean? What does excludability mean? What are the four categories of goods we can identify using those attributes, and what is an example of a good in each category?
The primary source of air pollution in the small town of Smokey, Nevada is a nearby steel mill. The local environmental agency has decided that the mill needs to reduce its emissions because the town's population is located directly downwind from it. Currently the agency is considering three different approaches to reducing pollution from the mill: a technology standard, an emission standard and an emission tax. Why might the owner of the mill prefer an emission standard to a technology standard that would produce the same level of emissions? a Because with emission standards the polluter is more flexible in selecting the technology that will minimize her abatement cost Ob. Because polluters usually try to stick to their existing technology O C. Because it has been proven to be easier to implement O d. Because polluters, as all producers are suspicious about new technologies
The following table shows the current level of toxic waste dumped by two firms and the marginal cost of cleaning up additional 10 lbs increments of waste. Suppose the government has imposed a pollution tax of $7 per 10 lbs of waste. Calculate the reduction in total pollution and the total cost to the firms of doing so? Current waste (lbs) Cost of reducing by 1st 10 lbs Cost of reducing by 2nd 10 lbs Cost of reducing by 3rd 10 lbs Cost of reducing by 4th 10 lbs Cost of reducing by 5th 10 lbs Firm A 60 $5 $10 $15 $20 $25 Firm B Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. 80 $2 $4 $6 $8 $10
Economists define the efficient amount of fund pollutants as the amount that minimizes the sum of damage and control costs. Using this definition, they derive two general rules, one of which is that the efficient level of pollution is not generally zero. Briefly explain why this is true.
There are 2 firms: Firm X and Firm Y. Firm X has the following cost to pollution reduction: MCx = 10 + 2Qx Firm Y has the following cost to pollution reduction: MCy = 4 + 4Qy Both firms currently produce 100 units of pollution, for a combined production of 200 units. The government has decided to reduce total pollution to 56 units. To do this, the government introduces 56 tradable permits, giving 28 to each firm. What is the equilibrium price of each permit?
There are three industrial firms in Kitona. The Government wants to reduce pollution to 120 units, so it gives each firm 40 tradable pollution permits. Firm Initial Pollution Level Cost reducing pollution by 1 unit A 70 Units $20 B 80 Units $25 C 50 Units $10 Who sells permits and how many do they sell? Who buys permits and how many do they buy? Briefly explain why the sellers and buyers are each willing to do so. What is the total cost of pollution reduction in this situation?