In response to increasing concern about man made climate change, there have been a number of policy proposals. This includes:Cap and TradeLetting the free-market deal with the issue on its own.Pick one of these proposals. Write a short argument for your policy proposal. Focus specifically on the issues related to market efficiency and externalities. How does your proposal address these issues.

Answered: In response to increasing concern about…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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In response to increasing concern about man made climate change, there have been a number of policy proposals. This includes:

Cap and Trade
Letting the free-market deal with the issue on its own.

Pick one of these proposals. Write a short argument for your policy proposal. Focus specifically on the issues related to market efficiency and externalities. How does your proposal address these issues.

Definition Definition Degree to which financial markets incorporate all available information into the prices of assets. In a more efficient market, the prices reflect the available information more than that in a weak efficient market. It is difficult for investors to outperform the market in a strong efficient market. This is because all the available information is already discounted in the asset's price. However, in a weak-form efficiency, the market does not reflect all information in the asset's price. As a result, it becomes easier to generate better returns in a weak form or an inefficient market.

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Step 1

The problem of environmental degradation occurs (pollution) due to the human economic activities and that led to the negative externalities.

Prescence of negative externalities market mechanism fails to allocate and distribute the resources efficiently.

Which is also known as Market failure.

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