The previous analysis hinges on the government having good information regarding either the demand for pollution permits or the optimal level ofpollution (or both). Given that the appropriate policy (tradable permits or corrective taxes) can depend on the available information and the policygoal, consider the following scenario.An environmental study conducted in a particular city suggests that if a chemical plant emits more than 70 million tons of chemicalseach year, the water supply will become contaminated beyond the point where filtration techniques can make it safe for drinking.If this is all the information the government has, which solution to reduce pollution is appropriate? Check all that apply.O Tradable permitsO Corrective taxes Paper factories emit chemicals as a waste product. This generates a cost to society that is not paid for by the firm; therefore, pollution is a negativeexternality of paper production. Suppose the U.S. government wants to correct this market failure by getting firms to internalize the cost of pollution.To do this, the government can charge firms for pollution rights (the right to emit a given quantity of chemicals). The following graph shows thedaily demand for pollution rights.Use the graph input tool to help you answer the following questions. You will not be graded on any changes you make to this graph.Note: Once you enter a value in a white field, the graph and any corresponding amounts in each grey field will change accordingly.Graph Input Tool80Daily Demand for Pollution Rights72I Price(Dollars per ton)864QuantityDemanded36056(Millions of tons)48403224Demand1684080 120 160 200 240 280 320 360 400QUANTITY (Millions of tons)Suppose the government has determined that the socially optimal quantity of chemical pollution is 160 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 Sper tonof 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 thedesired level of pollution. Instead, it auctions off tradable pollution permits. Each permit entitles its owner to emit one ton of chemicals per day. Toachieve the socially optimal quantity of pollution, the government auctions off 160 million pollution permits. Given this quantity of permits, the pricefor each permit in the market for pollution rights will be $PRICE (Dollars per ton)

The curve that depicts various quantities of goods and services being demanded by customers at…

Suppose the government has determined that the socially optimal quantity of chemical pollution is 160 million tons per day. One way governments can charge firms for pollution rights is by imposing a per-unit tax on emissions. tax (or price in this case) of S per ton 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 160 million pollution permits. Given this quantity of permits, the price for each permit in the market for pollution rights will be $

Suppose the government has determined that the socially optimal quantity of chemical pollution is 160 million tons per day. One way governments can charge firms for pollution rights is by imposing a per-unit tax on emissions. tax (or price in this case) of S per ton 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 160 million pollution permits. Given this quantity of permits, the price for each permit in the market for pollution rights will be $

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Power stations emit sulfur dioxide as a waste product. This generates a cost to society that is not paid for by the firm; therefore, pollution is a negative externality of power production. Suppose the U.S. government wants to correct this market failure by getting firms to internalize the cost of pollution. To do this, the government can charge firms for pollution rights (the right to emit a given quantity of sulfur dioxide). The following graph shows the daily demand for pollution rights. Use the graph input tool to help you answer the following questions. You will not be graded on any changes you make to this graph. Note: Once you enter a value in a white field, the graph and any corresponding amounts in each grey field will change accordingly. Graph Input Tool (? Daily Demand for Pollution Rights 70 I Price (Dollars per ton) 63 7 56 Quantity Demanded 270 49 (Millions of tons) 42 35 28 21 Demand 14 7 90 120 150 180 210 240 270 300 QUANTITY (Millions of tons) 30 60 PRICE (Dollars per…
Can you explain why the following statement is false? The efficient level of a pollution-emitting activity (e.g., production of a good) is that at which the marginal external cost of pollution is equal to zero.
Q. 3 in a small town, a paper mill discharges wastewater to the river, causing water pollution. suppose MD=3E and MAC= 40-2E. calculate the following and illustrate your answers with graphing: a) socially efficient level of emissions? what is total social cost related to this level of emission? b) consider a liability law requiring the polluter to compensate for all the damages caused. what is the polluter's optimal choice of emission level? what is total compliance cost at this level? c) consider an Emission standard set at the efficient level. what is polluters total compliance cost at this level? d) consider an emission tax policy. what is the optimal tax rate to achieve the efficienct emission level? what is polluter's total compliance cost at this level? e) consider an abatement subsidy policy. what is the optimal subsidy rate to achieve the efficienct emission level; what is polluters net receipt at this level?
The graph shows the marginal cost of abatement curve, which shows the extra cost to the firm of cleaning up an additional unit of pollution. When a pollution charge of $5 per unit emitted is imposed, how many units of pollution will the firm choose to clean up? units of pollution cleaned up: When a pollution tax of $20 per unit emitted is imposed, how many units of pollution will the firm choose to clean up? units of pollution cleaned up:
Consider a market given by the following supply and demand equations P=8+2Q P=97-3Q It is known that for every extra unit produced, society faces an extra cost of $8 per unit. Further it is known than each unit produced releases an extra 90.0 t of GHG into the atmosphere. What would be the optimal level of pollution in this market?
Consider two firms with the following marginal abatement costs (MAC) as a function of emissions (E): MAC_1 = 11 - 2E_1 MAC_2 = 8.5 - E_2, and assume marginal external damages (MED) from the aggregate emissions of both firms (E_Agg = E_1 + E_2) is: MED = .5E_Agg. To achieve the socially efficient level of aggregate emissions (E*_Agg), the government institutes a per unit subsidy to abatement equal to $____. Answer:
Suppose that a particular market contains a negative externality in consumption, with MSC=MPC. What should a Pigouvian tax be set to, in order to correct the externality?
Consider two firms with the following marginal abatement costs (MAC) as a function of emissions (E): MAC_1 = 24 - 2E_1 MAC_2 = 20 - E_2, and assume marginal external damages (MED) from the aggregate emissions of both firms (E_Agg = E_1 + E_2) is: MED = 2E_Agg. To achieve the socially efficient level of aggregate emissions (E*_Agg), the government institutes a cap and trade policy and sets the cap equal to the socially efficient level of emissions (E*_Agg). If firm 2 is initially grandfathered 5 permits, it will buy more permits. (Note: your answer can be positive or negative; if it is positive, the firm is buying additional permits; if it is negative, the firm sells permits. So, for example, an answer of -10 implies that the firm sells 10 permits)
ayor Grinch imposes a $1 tax on each bottle of Zlurp. Consumption per person is now bottles. This yields a per-person consumer surplus of not including the cost of pollution, a per-person external cost of , and government revenue of per person. Total surplus per person is now as a result of this policy. (Hint: Total surplus is equal to consumer surplus minus the external cost of pollution plus government revenue.) Based on your calculations, you support the mayor's policy because it welfare compared to before the tax.
The following is a copy of the information from Question 1: Consider Product NE, which has a negative externality associated with its production and use ( i.e., the “Incidental Cost” ( IC) of each unit of Product NE is greater than zero). You are told that : * The “Efficient” Output of Product NE = 9000 units * The Free-Market Equilibrium Output of Product NE = 10,000 units * The Consumer’s Surplus + Producer’s Surplus on Unit Number 6000 ( i.e., on that one unit ALONE) is equal to $ 70 ( i.e., the sum of CS + PS = $ 70) * The Cumulative Surplus on the first 9000 units produced is equal to $ 175,000 ( i.e., the sum of the surplus( to society) on ALL 9000 units adds up to $ 175,000) Is the Cumulative Surplus on the first 10,000 units ( i.e., ALL 10,000 units together) greater than $ 175,000, less than $ 175,000, or exactly equal to $ 175,000 ? a. Greater Than $…
Power stations emit sulfur dioxide as a waste product. This generates a cost to society that is not paid for by the firm; therefore, pollution is a negative externality of power production. Suppose the U.S. government wants to correct this market failure by getting firms to internalize the cost of pollution. To do this, the government can charge firms for pollution rights (the right to emit a given quantity of sulfur dioxide). The following graph shows the daily demand for pollution rights. Use the graph input tool to help you answer the following questions. You will not be graded on any changes you make to this graph. Note: Once you enter a value in a white field, the graph and any corresponding amounts in each grey field will change accordingly. Graph Input Tool Daily Demand for Pollution Rights 81 IPrice (Dollars per ton) Quantity Demanded (Millions of tons) 72 63 315 Demand 35 70 106 140 175 210 245 0 215 190 QUANTITY (Mlons of tons Suppose the government has determined that the…
The primary source of air pollution in the small town of Smokey, Nevada is a nearby steel mill. The local environmental agency has decided that the mill needs to reduce its emissions because the town's population is located directly downwind from it. Currently the agency is considering three different approaches to reducing pollution from the mill: a technology standard, an emission standard and an emission tax. Why might the owner of the mill prefer an emission standard to a technology standard that would produce the same level of emissions? a Because with emission standards the polluter is more flexible in selecting the technology that will minimize her abatement cost Ob. Because polluters usually try to stick to their existing technology O C. Because it has been proven to be easier to implement O d. Because polluters, as all producers are suspicious about new technologies