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Business

Economics

Can you

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.
22.) Consider a market subject to a negative externality cause by pollution. Suppose that, initially, the government is dealing with this negative externality using a Pigouvian tax. The government is considering switching its handling of the negative externality to a scheme where it auctions off pollution licenses to producer instead. If the government makes this policy change, then producer surplus will and government surplus will a.) Increase, increase b.) Decrease, decrease c.) Decrease, increase d.) None of the above 23.) Suppose that Larry, Moe, and Curly's individual demand curves for statues built in their town park are given by PıD =100–QP_PMD =200–2Q", and Pc³ =300–3Qº respectively. What is the slope of the MBS curve for statues? а.) -4 b.) -5 с.) -6 d.) -7 24.) Suppose that, in the above example, statues are sold in a competitive market with a supply curve given by PS =516+QS. What quantity of statues should the local government install in the park to maximize total surplus?…
2. Externality. The table below lists the expected daily benefits between a resident that owns a tree and a neighbor who receives benefits from the neighbor's tree in terms of a providing a green canopy, a view, and sheltering wildlife. The owner of the tree receives benefits from having the tree on his yard but must also bear the costs of watering and maintaining the tree. The question is who owns the right to decide if the tree should be cut down or not. Assume both parties can negotiate at zero cost Homeowner Neighbor Tree Stays $25 $35 Tree is Cut Down $40 $30 a. Based on total benefits should the tree survive or be cut down? Explain? b. If the Homeowner were assigned the right to decide the fate of the tree, what would happen to the tree? Explain. c. If the Neighbor were assigned the right to decide the fate of the tree, what would happen to the tree? Explain. Could the Homeowner negotiate with the Neighbor for a different solution? Explain
(a) Shortly explain the relationship between elasticity of a good and the consumption tax rate it should be imposed upon it. (b) What do we man by rivalry of a good? Give examples of rival and non-rival goods. To what extent is rivalry a crucial aspect of a public good? (c) Give examples of positive and negative production and consumption externalities. (so you need to give 4 examples in total) (d) Explain whether the Coase theorem is useful in practice. (e) Define vertical and horizontal equity objectives of a tax system. Which one do you think is more important in establishing equity and/or fairness? (f) What are the political implications of the First and Second Welfare theorems? Shortly explain. 3
4. Understanding different policy options to correct for negativeexternalities Carbon dioxide emissions have been linked to increased air pollution. The following table lists some possible public policies aimed at reducing the amount of carbon dioxide in the air. For each policy listed, identify whether it is a command-and-control policy (regulation), tradable permit system, corrective subsidy, or corrective tax. Command- and- Tradable Permit System Corrective Tax Control Corrective Public Policy Policy Subsidy The government agrees to reimburse all factories that purchase new, emissions-reducing technology in order to provide cleaner air. The government limits total carbon-dioxide emişsions by all factories to 120,000 tons per month. Each individual factory is given the right to emit 110 tons of carbon dioxide, and factories may buy and sell these rights in a marketplace. The government charges factories $400-for every ton of carbon dioxide they emit. The government orders every…
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12. Give an example of a public good, and explain why it is a public good. What would happen if we relied only on a free market to produce and sell this public good?? How do you think this public good should be provided? (this last question is supposed to be a matter of personal opinion)
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4. Understanding different policy options to correct for negativeexternalities Carbon dioxide emissions have been linked to melting of sea ice. The following table lists some potential regulations targeting the amount of airborne carbon dioxide. For each policy listed, identify whether it is a command-and-control policy (regulation), tradable permit system, corrective subsidy, or corrective tax. Tradable Permit System Public Policy The government limits total carbon-dioxide emissions by all factories to 260,000 tons per five years. Each individual factory is given the right to emit 230 tons of carbon dioxide, and factories may buy and sell these rights in a marketplace. Trees take carbon dioxide out of the air and convert it to oxygen, so the government funds a tree-planting initiative by offering $440 to any citizen who plants a tree. The government orders every factory to adopt a new technology, which reduces carbon-dioxide emissions into the atmosphere. The government charges…
9. Private solutions to correct for externalities Consider the following scenario: Suppose that a flower nursery benefits from having a butterfly farm located only a few miles away, because the presence of the insects greatly improves flower pollination. Lawyers for the two companies meet to draft a legal document specifying the number of butterflies the farm promises to maintain in exchange for payments to be made by the nursery. Which of the following types of private solutions to the externality of pollination has occurred in this case? Moral codes and social sanctions Charities Contracts Integration of different types of businesses through merger or acquisition It's important to note that sometimes private solutions to externalities do not work. For example, this occurs when communications barriers or social customs are important enough relative to the potential gains involved that
4. The dollar value of fish caught from Lake Spooky is given by f(b) = 1006 - 56², where b is the number of fishing boats. Fishing boats are costless to buy and operate. What is the optimal tax that the Department of Fish Affairs should impose on fishing boats, so as to avoid the Tragedy of the Commons? (a) $50 per boat (b) $1 per boat (c) $0 per boat (d) $100 per boat
5. Property rights and market failures Loggers are much likely to supply wood to the market if property rights are not enforced. In the presence of market failures, public policy can improve economic efficiency. Classify the source of market failure in each case listed. Market Market Failure Power Externality A manufacturing plant dumps chemical waste into a nearby river, poisoning the water supply for a small town downstream. A single grocery store is the only source of food in a small town, giving the store the ability to influence the price of food.