Marginal benefit, to individual producer $1,100 MB 1,000 900 800 700 600 MBA 500 400 300 200 100 0 200 600 1,000 1,400 1,800 2,200 Quantity of pollution emisions (tons) 7. Carbon Dioxide Pollution in Duopoly. Currently each firm is emitting 2,000 tons of carbon dioxide, so the total emissions is 4,000 tons. The government wishes to limit total emissions to 1,600 tons in the market. a. (16) The government decides to impose environmental standards so that each firm will be allowed to emit 800 tons each. What will be the total cost in this Duopoly if the government does this? b. {16} Instead of imposing environmental standards, the government passes an emissions tax of $400 per ton. How much carbon dioxide will each firm emit in this case and what will be the total cost in this Duopoly with the emissions tax?

A country called Sherwood is very heavily covered with a forest of 50,000 trees. There are proposals to clear some of Sherwoods forest and grow com, but obtaining this additional economic output will have an environmental cost from reducing the number of trees. Table 12.11 shows possible combinations of economic output and environmental protection. Sketch a graph of a production possibility frontier with environmental quality on the horizontal axis, measured by the number of trees, and the quantity of economic output, measured in corn, 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 T and R, decide which one is better. Why? In the choice between T and S, can you say which one is better, and why? If you had to guess, which choice would you think is more likely to represent a command-and-control environmental policy and which choice is more likely to represent a market-oriented environmental policy, choice Q or S? Why?

Refer to Table 12.2. The externality created by the refrigerator production was 100. However, once we accounted for both the private and additional external costs, the market price increased by only 50. If the external costs were 100 why did the price only increase by 50 when we accounted for all costs?

Suppose a city releases 16 million gallons of raw sewage into a nearby lake. Table 12.8 shows the total costs of cleaning up the sewage to different levels, together with the total benefits of doing so. (Benefits include environmental, recreational, health, and industrial benefits.) Using the information in Table 12.8, calculate the marginal costs and marginal benefits of reducing sewage emissions for this city. See Production, Costs and Industry Structure if you need a refresher on how to calculate marginal costs. What is the optimal level of sewage for this city? Why not just pass a law that films can emit zero sewage? After all, the total benefits of zero emissions exceed the total costs.

As the extent of environmental protection expands, would you expect the marginal benefits of environmental protection to rise or fall? Why or why not?

The rows in Table 12.7 show three market-oriented tools for reducing pollution. The columns of the table show three complaints about command-and-control regulation. Fill in the table by stating briefly how each market-oriented tool addresses each of the three concerns.

Is zero pollution possible under a marketable permits system? Why or why not?

An emissions tax on a quantity of emissions from a film is not a command-and-control approach to reducing pollution. Why?

Suppose you want to put a dollar value on the external costs of carbon emissions from a power plant. What information or data would you obtain to measure the external [not social] cost?

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?