↓. As part of its production process the Peabody Coal Company used to dump foul sludge nto the Ohio River. A Court has ordered to clean up an ‘economically feasible' quantity of the sludge. Now the environmental group that brought the suit and Peabody are itigating over Peabody's obligation under the order. If the total social cost and total social benefits of sludge removal are as listed in the table below, how much sludge would Peabody remove? Sludge Removal 0 1 2 3 4 5 TSB 0 45 80 110 134 150 TSC 0 10 25 42 62 90

What is a pollution charge and what incentive does it provide for a firm to take external costs into account?

How can high-income countries benefit from covering much of the cost of reducing pollution created by low-income countries?

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?

Suppose you want to put a dollar value on the external costs of carbon emissions from a power plant. What information or data would you obtain to measure the external [not social] cost?

Identify the following situations as an example of a negative or a positive externality: You are a birder (bird watcher), and your neighbor has put up several birdhouses in the yard as well as planting trees and flowers that attract birds. Your neighbor paints his house a hideous color. Investments in private education raise your countrys standard of living. Trash dumped upstream flows downstream right past your home. Your roommate is a smoker, but you are a nonsmoker.

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 that Sonys R. Is this a private or social benefit?

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?

Show the market for cigarettes in equilibrium, assuming that there are no laws banning smoking in public. Label the equilibrium private market price and quantity as Pm and Qm. Add whatever is needed to the model to show the impact of the negative externality from second-hand smoking. (Hint: In this case it is the consumers, not the sellers, who are creating the negative externality.) Label the social optimal output and price as Fe and Qe. On the graph, shade in the deadweight loss at the market output.