8. Property rights and market failures Loggers are much In the presence of market failures, public policy can improve economic efficiency. Classify the source of market fallure in each case listed. Market Failure A person smoking in a restaurant emits second-hand smoke that harms other restaurant patrons. There is only one car dealership in a small town, giving the dealership the ability to influence the price of cars. likely to supply wood to the market if property rights are enforced. Market Power Externality

8. Property rights and market failures Loggers are much In the presence of market failures, public policy can improve economic efficiency. Classify the source of market fallure in each case listed. Market Failure A person smoking in a restaurant emits second-hand smoke that harms other restaurant patrons. There is only one car dealership in a small town, giving the dealership the ability to influence the price of cars. likely to supply wood to the market if property rights are enforced. Market Power Externality

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter12: Environmental Protection And Negative Externalities

Section: Chapter Questions

Problem 9SCQ: The rows in Table 12.7 show three market-oriented tools for reducing pollution. The columns of the...

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In the Land of Purity, there is only one form of pollution, called gunk. Table 12.14 shows possible combinations of economic output and reduction of gunk, depending on what kinds of environmental regulations you choose. Sketch a graph of a production possibility frontier with environmental quality on the horizontal axis, measured by the percentage reduction of gunk, and with the quantity of economic output on the vertical axis. Which choices display productive efficiency? How can you tell? Which choices show allocative efficiency? How can you tell? In the choice between K and L, can you say which one is better and why? In the choice between K. and N, can you say which one is better, and why? If you had to guess, which choice would you think is move likely to represent a command-and-control environmental policy and which choice is more likely to represent a market-oriented environmental policy, choice L or M? Why?
What is the free rider problem?
A country called Sherwood is very heavily covered with a forest of 50,000 trees. There are proposals to clear some of Sherwoods forest and grow com, but obtaining this additional economic output will have an environmental cost from reducing the number of trees. Table 12.11 shows possible combinations of economic output and environmental protection. Sketch a graph of a production possibility frontier with environmental quality on the horizontal axis, measured by the number of trees, and the quantity of economic output, measured in corn, on the vertical axis. Which choices display productive efficiency? How can you tell? Which choices show allocative efficiency? How can you tell? In the choice between T and R, decide which one is better. Why? In the choice between T and S, can you say which one is better, and why? If you had to guess, which choice would you think is more likely to represent a command-and-control environmental policy and which choice is more likely to represent a market-oriented environmental policy, choice Q or S? Why?
Classify the following pollution-control policies as command-and-control or market incentive based. A state emissions tax on the quantity of carbon emitted by each firm. The federal government requires domestic auto companies to improve car emissions by 2020. The EPA sets national standards for water quality. A city sells permits to films that allow them to emit a specified quantity of pollution. The federal government pays fishermen to preserve salmon.
Table 12.12, shows the supply and demand conditions for a firm that will play trumpets on the streets when requested. QS1 is the quantity supplied without social costs. QS2 is the quantity supplied with social costs. What is the negative externality in this situation? Identify the equilibrium price and quantity when we account only for private costs, and then when we account for social costs. How does accounting for the externality affect the equilibrium price and quantity?
Identify whether the market supply curve will shift right or left or will stay the same for the following: Films in an industry are required to pay a fine for their carbon dioxide emissions. Companies are sued for polluting the water in a river. Power plants in a specific city are not required to address the impact of their air quality emissions. Companies that use fracking to remove oil and gas from rock are required to clean up the damage.
Refer to Table 12.2. The externality created by the refrigerator production was 100. However, once we accounted for both the private and additional external costs, the market price increased by only 50. If the external costs were 100 why did the price only increase by 50 when we accounted for all costs?
Table 12.5 provides the supply and demand conditions for a manufacturing film. The third column represents a supply curve without accounting for the social cost of pollution. The fourth column represents the supply curve when the film is required to account for the social cost of pollution. Identify the equilibrium before the social cost of production is included and after the social cost of production is included.
Suppose a city releases 16 million gallons of raw sewage into a nearby lake. Table 12.8 shows the total costs of cleaning up the sewage to different levels, together with the total benefits of doing so. (Benefits include environmental, recreational, health, and industrial benefits.) Using the information in Table 12.8, calculate the marginal costs and marginal benefits of reducing sewage emissions for this city. See Production, Costs and Industry Structure if you need a refresher on how to calculate marginal costs. What is the optimal level of sewage for this city? Why not just pass a law that films can emit zero sewage? After all, the total benefits of zero emissions exceed the total costs.
The state of Colorado requires oil and gas companies who use fracking techniques to retune the land to its original condition after the oil and gas extractions. Table 12.9 shows the total cost and total benefits (in dollars) of this policy. Calculate the marginal cost and the marginal benefit at each quantity (acre) of land restored. See Production. Costs and Industry Structure if you need a refresher on how to calculate marginal costs and benefits. If we apply marginal analysis, what is the optimal amount of land to be restored?
An emissions tax on a quantity of emissions from a film is not a command-and-control approach to reducing pollution. Why?