Indicate whether the statements below are true or false. True Pollution taxes are more effective at reducing pollution than marketable permits. Marketable permits typically achieve pollution reduction at a lower cost than command-and-control regulation. The term "cap and trade" describes regulation by marketable permits. Marketable permits provide their owners with the right to pollute a specified amount. False Compared with no regulation, regulation with marketable permits increases firms' costs. Marketable permits are not as effective as pollution taxes at reducing pollution.

Given the following information:  Initially, a perfectly competitive market for a product is in equilibrium, with an upward-sloping straight-line market supply curve, a downward-sloping straight-line market demand curve, and a market price of $30 per unit.  Consumption of this product causes pollution.  Initially, the marginal external cost of the pollution caused by consuming the product is $9 per unit.  There is no government policy toward the externality. The government then mandates a shift to a new product version, and all firms adopt and produce the latest version.  Consumers view the new product version as equally as good as the initial product version. Consumption of the new version of the product causes less pollution, and the marginal external cost decreases by $3 per unit.  For each firm, production of the new product version does not change fixed cost, but it does increase average variable cost by $3 per unit. If necessary, the market adjusts to a new equilibrium.  There is…

Calculate private market equilibrium and the socially optimal equilibrium for the following negative production externality. (note: demand and supply functions are already in the inverse format) Demand: P = 100 - Q Supply: P=-50 + 2Q Marginal External Cost: MEC = 2Q Private Market Equilibrium = Socially Optimal Equilibrium = (enter your responses rounded to a whole number)

Externalities can not be positive. That is, there can be a third party cost associated with the production or consumption of a good or service, but there cannot be a benefit.  A) True B) False