BN11.2 (a) (b) (c)Case:• A beekeeper lives adjacent to an apple orchard.• The orchard owner benefits from the bees because each hive pollinates aboutone acre of apple trees.• The orchard owner pays nothing for this service, however, because the beescome to the orchard without his having to do anything.• Because there are not enough bees to pollinate the entire orchard, the orchardowner must complete the pollination by artificial means:o At a cost of $10 per acre of treeso Beekeeping has a marginal cost MC = 10 + 50,▪ where Q is the number of beehives.o Each hive yields $40 worth of honey.Questions:(a) How many beehives will the beekeeper choose to maintain?(b) Is this the economically efficient number of hives from the societal pointof view?(c) What could the orchard owner and/or the beekeeper do to produce a moreefficient operation?

When a firm produces a good sometimes it creates cost or benefits for other firms. If it is creating…

• A beekeeper lives adjacent to an apple orchard. • The orchard owner benefits from the bees because each hive pollinates about one acre of apple trees. • The orchard owner pays nothing for this service, however, because the bees come to the orchard without his having to do anything. • Because there are not enough bees to pollinate the entire orchard, the orchard owner must complete the pollination by artificial means:

• A beekeeper lives adjacent to an apple orchard. • The orchard owner benefits from the bees because each hive pollinates about one acre of apple trees. • The orchard owner pays nothing for this service, however, because the bees come to the orchard without his having to do anything. • Because there are not enough bees to pollinate the entire orchard, the orchard owner must complete the pollination by artificial means:

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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6. Achieving lower pollution Suppose a political candidate criticizes a government pollution permit policy that she says lets corporations buy and sell the right to pollute. She argues that our right to breathe and the future of our planet require real regulation instead of this type of government policy. Which of the following describes why most economists would disagree with her statement? The environment is so important that it should be protected as much as possible, regardless of the cost. A free market in tradable pollution permits is typically more efficient than government regulation. A corrective tax would result in a more efficient outcome than either tradable permits or government regulation would. Clean air is a fundamental right, and government regulation will allow too much pollution.
A company near a large city is required to keep its smokestack pollution to new lower levels, costing the company $2 million in additional equipment (which will last at least 10 years) and $100,000 a year in additional labor. Lowering the air pollutants in the region is expected to save $4 million in medical expenses in the affected region over the next 10 years. What level of pollution reduction gives the smallest benefit for money spent? Select one: a. From 1-20% of pollution reduction b. From a 20-40% pollution reduction c. From a 80-100% pollution reduction d. From a 60-80% pollution reduction
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QUESTION 19 Y the cost of smokestack scrubbers (to minimize polution) is $3000 and the damage of the polution to nearty farms is $5000, what will happen (per the Coase Theorem) when property rights are glven to the factory creating the pollution? O The scrubbers will not be instaled. O The sorubbers will be instaled. O We have no way of knowing whether or not the scrubbers will be installed.
Suppose a municipality votes to reduce the combined pollution introduced by three local companies. Presently, each firm creates 4 units of pollution in the area, for a total of 12 pollution units. The government can reduce total pollution in the area to 6 units by choosing between the following two methods:Methods to Reduce Pollution1. The government imposes pollution standards using regulation.2. The government issues tradable pollution permits.The costs faced by each firm are different, so it is more difficult for some firms to reduce pollution than others. The following table shows the cost faced by each firm to eliminate each unit of pollution. Assume that the cost of eliminating all 4 units of pollution (that is, reducing pollution to zero) is prohibitively expensive for all three firms.FirmCost of Eliminating the...First Unit of PollutionSecond Unit of PollutionThird Unit of Pollution(Dollars)(Dollars)(Dollars)Firm A 130 165 220Firm B 600 750 1,200Firm C…
Use the model of environmental pollution to model the following changes in a polluting industry to: i) the socially optimal level of pollution; ii) the total abatement costs; and ii) the total damage costs (а) A new technology is invented that allows firms to reducе pollution associated with each level of production output. (b) The government announces a new commitnment to more strictly enforce current environmental regulations. (c) A new study finds the pollutant in question to be more carcinogenic than originally thought.
8.1 Suppose we have an agricultural valley 100 km by 50 km, with a polluting electricity power plant. The power plant causes pollution problems in a narrow strip of land downwind of the plant, and within this valley. 10 km in length and 500 m in width, but no problems outside of that area. The total effect of the pollution is to make crop land less productive. If we were to clean up the pollution, would we expect land prices to increase? Where? Would we expect wages to decline? Would the changes in land prices and/or wages fully reflect the benefits of cleaning up the pollution? Why or why not?
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12. Bernard and Elton are neighbors. Bernard never mows his lawn, rakes his leaves, or trims his hedges. His overgrown yard is not only an eyesore, but it is pulling down the value of Elton's house. a) How could the Coase theorem be used to remedy this negative externality? b) Does it matter whether Bernard has the right to ignore his yard or Elton has the right to force him to clean it up?
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