16. Suppose there are two manufacturers A and B in the society, and each manufacturer will produce 100 units of pollution in the production process. The marginal pollution reduction costs (MAC) of the two manufacturers are respectively MAC₁-Q₁, and MAC2=90+ 2Q2. If the government wants to reduce social pollution by 50 units, how should the rate of pollution fee be determined? If the pollution reduction is to be reduced by 150 units, how should it be determined?

16. Suppose there are two manufacturers A and B in the society, and each manufacturer will produce 100 units of pollution in the production process. The marginal pollution reduction costs (MAC) of the two manufacturers are respectively MAC₁-Q₁, and MAC2=90+ 2Q2. If the government wants to reduce social pollution by 50 units, how should the rate of pollution fee be determined? If the pollution reduction is to be reduced by 150 units, how should it be determined?

Principles of Economics, 7th Edition (MindTap Course List)

7th Edition

ISBN:9781285165875

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter10: Externalities

Section: Chapter Questions

Problem 5PA

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Similar questions

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.
In the Land of Purity, there is only one form of pollution, called gunk. Table 12.14 shows possible combinations of economic output and reduction of gunk, depending on what kinds of environmental regulations you choose. Sketch a graph of a production possibility frontier with environmental quality on the horizontal axis, measured by the percentage reduction of gunk, and with the quantity of economic output 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 K and L, can you say which one is better and why? In the choice between K. and N, can you say which one is better, and why? If you had to guess, which choice would you think is move likely to represent a command-and-control environmental policy and which choice is more likely to represent a market-oriented environmental policy, choice L or M? Why?
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?
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