Please answer number 3 In the figure below, Sai is the long-run domestic supply curve of oil without consideringthe climate change damages resulting from burning more oil, Sa2 is the domestic supplycurve that includes these per-unit damages. Imported foreign oil is reflected by threesupply curves: Pw1 reflects the observed world price, Pw2 includes a “vulnerabilitypremium" due to national security in addition to world price, and Pw3 adds in the per-unitclimate change damage due to consuming more imported oil.$/UnitDomestic DemandP.w3PwА ВConsumption3). Economist Abba Lerner proposed a tariff on oil imports. The tariff is designed toreduce dependence on foreign sources as well as to discourage OPEC from raisingprices (since, due to the tariff, the delivered price would rise twice as much as theOPEC increase, causing a large subsequent reduction in consumption). Should thisproposal become public policy? Why or why not?

An externality refers to when the consumption/production by an economic agent affects an unrelated…

3). Economist Abba Lerner proposed a tariff on oil imports. The tariff is designed to reduce dependence on foreign sources as well as to discourage OPEC from raising prices (since, due to the tariff, the delivered price would rise twice as much as the OPEC increase, causing a large subsequent reduction in consumption). Should this proposal become public policy? Why or why not?

3). Economist Abba Lerner proposed a tariff on oil imports. The tariff is designed to reduce dependence on foreign sources as well as to discourage OPEC from raising prices (since, due to the tariff, the delivered price would rise twice as much as the OPEC increase, causing a large subsequent reduction in consumption). Should this proposal become public policy? Why or why not?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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