o reduce emissions, policy-makers are deciding between a tax on CO2 and a cap on CO2. The marginal social costs of emissions are known and given by the curve MSC. The slope of the marginal social benefits curve is relatively steep, but its position is uncertain. Policy-makers expect it to lie at MSBexp, while the actual position is MSBeff. What policy makes more sense? a) a tax makes more sense because it minimizes efficiency loss b) a cap makes more sense because it maximizes producer surplus c) a cap makes more sense because it maximizes consumer surplus d) a tax makes more sense because the policy maker can determine the exact amount of emissions e) a cap makes more sense because the policy maker can determine the exact amount of emissions
To reduce emissions, policy-makers are deciding between a tax on CO2 and a cap on CO2. The marginal social costs of emissions are known and given by the curve MSC. The slope of the marginal social benefits curve is relatively steep, but its position is uncertain. Policy-makers expect it to lie at MSBexp, while the actual position is MSBeff. What policy makes more sense?
a) a tax makes more sense because it minimizes efficiency loss
b) a cap makes more sense because it maximizes producer surplus
c) a cap makes more sense because it maximizes consumer surplus
d) a tax makes more sense because the policy maker can determine the exact amount of emissions
e) a cap makes more sense because the policy maker can determine the exact amount of emissions
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