Question: 1 Assume that the ave arms in the following table each throw 5 units of pollution into the environment every day. The cost of eliminating these units of pollution is given in table 2. Table 2 Using the table 2 above, suppose the Environmental Protection Agency decides that the optimal amount of pollution is only 15 tons. Instead of using the set standard method, the government sells 15 permits to pollute at a price of $439 each. Each permit allows the arm to pollute 1 ton. By using the permit method the total costs to clean-up are (do not use a $ sign) (hint: do not count the units bought with the permit as those are just a wealth transfer within the economy from the arms to the government) Guess: 2,130 (with margin: 0) Question: 2 Use Figure 4 (Graph 6) to answer the question below. This figure shows a market with private costs and with social costs (Private + Public). What is the Socially Optimal Price (no dollar signs, 2-decimal points): Guess: 1.80 What is the Socially Optimal Quantity (no decimals): Guess: 35 Question 3: The marginal external cost associated with plastic production is constant at $8 per ton per year. The competitive market equilibrium for plastic production is currently 10 million tons per year. A corrective tax on plastic production: a. will collect more than $80 million annually. b. will collect less than $80 million annually. c. will collect $80 million annually. d. will collect $80 million annually and will reduce annual damages to those other than buyers and sellers of plastic to zero. e. will reduce annual damages to those other than buyers and sellers of plastic to zero.
Economics: Public Economics
Question: 1
Assume that the ave arms in the following table each throw 5 units of pollution into the environment every day. The cost of eliminating these units of pollution is given in table 2.
Table 2
Using the table 2 above, suppose the Environmental Protection Agency decides that the optimal amount of pollution is only 15 tons. Instead of using the set standard method, the government sells 15 permits to pollute at a
(hint: do not count the units bought with the permit as those are just a wealth transfer within the economy from the arms to the government)
Guess: 2,130 (with margin: 0)
Question: 2
Use Figure 4 (Graph 6) to answer the question below. This figure shows a market with private costs and with
What is the Socially Optimal Price (no dollar signs, 2-decimal points):
Guess: 1.80
What is the Socially Optimal Quantity (no decimals):
Guess: 35
Question 3:
The marginal external cost associated with plastic production is constant at $8 per ton per year. The competitive
a. will collect more than $80 million annually.
b. will collect less than $80 million annually.
c. will collect $80 million annually.
d. will collect $80 million annually and will reduce annual damages to those other than buyers and sellers of plastic to zero.
e. will reduce annual damages to those other than buyers and sellers of plastic to zero.
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