Negative Externalities cont. First Unit of Pollution Second Unit of Pollution Third Unit of Pollution Firm D 85 175 220 85 140 180 F 450 800 1225 C) The government gives two permits to each firm. Each permit allows the firm to pollute one unit. Firms can trade these. If the price is set at $225, who will buy and sell permits? How much does total reduction cost in this scenario. (Do not include permit price.) D) Instead, the price is is set at $200. Who will buy and sell permits? How much does total reduction cost in this scenario. (Do not include permit price.) E) What does this say about using permits versus other methods?

Negative Externalities cont. First Unit of Pollution Second Unit of Pollution Third Unit of Pollution Firm D 85 175 220 85 140 180 F 450 800 1225 C) The government gives two permits to each firm. Each permit allows the firm to pollute one unit. Firms can trade these. If the price is set at $225, who will buy and sell permits? How much does total reduction cost in this scenario. (Do not include permit price.) D) Instead, the price is is set at $200. Who will buy and sell permits? How much does total reduction cost in this scenario. (Do not include permit price.) E) What does this say about using permits versus other methods?

Principles of Microeconomics

7th Edition

ISBN:9781305156050

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter10: Externalities

Section: Chapter Questions

Problem 5PA

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PRICE (Dollars per ton) 80 72 64 56 48 40 32 24 16 B Demand 0 25 50 75 100 125 150 175 200 225 250 QUANTITY (Millions of tons) Graph Input Tool Daily Demand for Pollution Rights Price 8 (Dollars per ton) Quantity Demanded (Millions of tons) 225 Suppose the government has determined that the socially optimal quantity of sulfur dioxide emissions is 125 million tons per day. One way governments can charge firms for pollution rights is by imposing a per-unit tax on emissions. A tax (or price in this case) of $ of sulfur dioxide emitted will achieve the desired level of pollution. per ton Now suppose the U.S. government does not know the demand curve for pollution and, therefore, cannot determine the optimal tax to achieve the desired level of pollution. Instead, it auctions off pollution permits. Each permit entitles its owner to emit one ton of sulfur dioxide per day. To achieve the socially optimal quantity of pollution, the government auctions off 125 million pollution permits. Given…
PRICE (Dollars perton) 90 81 72 63 54 45 30 27 18 9 0 0 + I 40 60 80 100 120 140 160 180 200 QUANTITY (Millions of tons) 20 40 Demand Graph Input Tool Daily Demand for Pollution Rights Price (Dollars per ton) Quantity Demanded (Millions of tons) 9 180 Suppose the government has determined that the socially optimal quantity of chemical pollution is 140 million tons per day. Corrective taxes Tradable permits One way governments can charge firms for pollution rights is by imposing a per-unit tax on emissions. A tax (or price in this case) of S of chemicals emitted will achieve the desired level of pollution. (?) Now suppose the U.S. government does not know the demand curve for pollution and, therefore, cannot determine the optimal tax to achieve the desired level of pollution. Instead, it auctions off tradable pollution permits. Each permit entitles its owner to emit one ton of chemicals per day. To achieve the socially optimal quantity of pollution, the government auctions off 140…
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(Figure: Toxic Waste) From the graph, external cost per ton of toxic waste would be Price ($ per ton) 2222288822 200 180 160 140 120 100 8 80 80 40 20 0 $60. $70. $80. $90. 10 20 30 0 40 50 GO 70 80 90 100 110 120 Quantity (tons of toxic waste)
3. The effect of negative externalities on the optimal quantityof consumption Consider the market for steel. Suppose that a steel manufacturing plant dumps toxic waste into' a nearby river, creating a negative externality for those living downstream from the plant. Producing an additional ton of steel imposes a constant external cost of $385 per ton. The following graph shows the demand (private value) curve and the supply (private cost) curve for steel. Use the purple points (diamond symbol) to plot the social cost curve when the external cost is $385 per ton. 1100 990 Social Cost 880 770 Supply (Private Cost) 660 550 440 330 220 Demand 110 (Private Value) 1 2 14 6. 7 QUANTITY (Tons of steel). PRICE (Dollars per ton of steel)
MSC 10 4 MSB 100 200 300 400 500 600 Quantity (dozens of doughnuts per day) 18) The above figure shows the marginal social benefit and marginal social cost curves of doughnuts in the nation of Kaffenia. There is no external benefit. What is the marginal benefit to the citizen of Kaffenia who consumes the 100th dozen doughnuts each day? [5 POINTS] A) $10.00 per dozen B) $8.00 per dozen C) $6.00 per dozen D) $4.00 per dozen 19) The above figure shows the marginal social benefit and marginal social cost curves of doughnuts in the nation of Kaffenia. What is the marginal social cost to the economy of Kaffenia of producing the 100th dozen doughnuts each day? [4 POINTS] A) $10.00 per dozen B) $8.00 per dozen C) $6.00 per dozen D) $4.00 per dozen Marginal cost and marginal benefit (dollars per dozen)
Explanation it correctly Q)Is nutella positive externalities or negative?
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Question Completion Status: The market below has an externality. Which area represents the total cost or benefit of the externality if Qo units are produced and consumed? A H D. MSB Q (If you can't see the graph or want to see a larger version then click here.) O C+E Он O F+G O A+B+D
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Refer to Figure 5-6. One way to obtain the economically efficient amount of chicken pox vaccinations is for governments to subsidize these vaccinations. What is the size of the per-vaccination Pigovian subsidy that the government must provide to internalize the external benefits? (PE - PG) (PF - PG) PE (PE - PF)