Economics:
10th Edition
ISBN: 9781285859460
Author: BOYES, William
Publisher: Cengage Learning
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Chapter 27, Problem 8E
To determine
The optimal amount of garbage.
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The graph shows the marginal benefit and marginal cost of a waste disposal system in a city of 1 million people. What is the efficient capacity of the waste disposal system and how much does each citizen pay in taxes? The efficient capacity is ... million gallons a day. If the city installs the efficient capacity, each person pays ... in taxes.
Define social benefit.
Four firms called Elm, Maple, Oak, and Cherry, produce wooden chairs. However, they also produce a great deal of garbage (a mixture of glue, varnish, sandpaper, and wood scraps). The first row of Table shows the total amount of garbage (in tons) that each firm currently produces. The other rows of the table show the cost of reducing garbage produced by the first five tons, the second five tons, and so on. First, calculate the cost of requiring each firm to reduce the weight of its garbage by one-fourth. Now, imagine that the government issues marketable permits for the current level of garbage, but the permits will shrink the weight of allowable garbage for each firm by one-fourth. What will be the result of this alternative approach to reducing pollution?
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