1. The Government of Yokuku considers applying one of the following policies: a tax or a standard, in order to reduce pollution level from P to Po. The government economist drew the following graph, representing the marginal abatement cost (MAC) to the polluters, the marginal damage to the society (MD), the optimal tax level (Tax level) and the socially optimal pollution level (Po). 1.1 What is the total abatement cost to the polluter under the tax policy? a. A b. B c. A+B d. A+B+C 1.2 What is the total abatement cost to the polluter under the standard policy? a. A b. B c. A+B d. A+B+C 1.3 What is the total damage cost under the tax policy? a. A b. B c. A+B d. A+B+C 1.4 What is the total damage cost under the standard policy? a. A b. B c. A+B d. A+B+C 1.5 What is the total tax cost under the standard policy? a. There is no tax cost under the standard policy b. B c. C d. B+C 1.6 What is the total tax cost under the tax policy? a. There is no tax cost under the tax policy b. B c. C d. B+C 1.7 What is the total social cost under tax policy? a. A+2B+C b. A+B c. B+C d. A+B+C 1.8 What is the total social cost under standard policy? a. A+2B+C b. A+B c. B+C d. A+B+C 1.9 Which environmental policy is more socially efficient? a. Tax b. Standard c. Both tax and standard policies are equally efficient 1.10 What is the difference in social cost between the tax policy and the standard policy? a. A+B+C b. B+C c. A+C d. C

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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1. The Government of Yokuku considers applying one of the following policies: a tax
or a standard, in order to reduce pollution level from P to Po.
The government economist drew the following graph, representing the marginal abatement cost
(MAC) to the polluters, the marginal damage to the society (MD), the optimal tax level (Tax level) and
the socially optimal pollution level (Po).
1.1 What is the total abatement cost to the polluter under the tax policy?
a. A
b. B
c. A+B
d. A+B+C
1.2 What is the total abatement cost to the polluter under the standard policy?
a. A
b. B
c. A+B
d. A+B+C
1.3 What is the total damage cost under the tax policy?
a. A
b. B
c. A+B
d. A+B+C
1.4 What is the total damage cost under the standard policy?

a. A
b. B
c. A+B
d. A+B+C
1.5 What is the total tax cost under the standard policy?
a. There is no tax cost under the standard policy
b. B
c. C
d. B+C
1.6 What is the total tax cost under the tax policy?
a. There is no tax cost under the tax policy
b. B
c. C
d. B+C
1.7 What is the total social cost under tax policy?
a. A+2B+C
b. A+B
c. B+C
d. A+B+C
1.8 What is the total social cost under standard policy?
a. A+2B+C
b. A+B
c. B+C
d. A+B+C
1.9 Which environmental policy is more socially efficient?
a. Tax
b. Standard
c. Both tax and standard policies are equally efficient
1.10 What is the difference in social cost between the tax policy and the standard policy?
a. A+B+C
b. B+C
c. A+C
d. C

Tax level
0
MAC
C
B
Po
A>>
MD
P
Pollution
level
Unregulated
Pollution level

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