the socially optimal price? place the line segment labled pollution limitIn accordance with the 1990 Clean Air Act, the hypothetical state of South Smog imposes a pollution limit on the market forsteel manufacturing shown on the graph below. Place the line segment labeled "Pollution limit" at the optimal pollution limit.Price and cost ($ per ton)10APollution limit B9Marginal social cost874210оDMarginal costDemand = marginal benefit2468 10 12 1416. 18 20Quantity in thousands of tons

The given graph represents the graph of negative externality. Here the marginal private cost is more…

Answered: the socially optimal price? place the…

Micro Economics For Today

10th Edition

ISBN:9781337613064

Author:Tucker, Irvin B.

Publisher:Tucker, Irvin B.

Chapter14: Environmental Economics

Section: Chapter Questions

Problem 17SQ

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cap-and-trade and windfall profitsA city called Seoul is suffering from high concentrations of mercury in the air, caused by burningcoal in power plants. There are two of these plants close to the city. The city’s mayor wants touse cap-and-trade to reduce emissions to a reportedly “safe” level of 60 tons. The two firms havethe following marginal benefits of emissions: MB1 = 100 – 2e1, MB2 = 25 – 0.5e2.a. How much mercury will each firm emit? What allowance price will prevail in themarket?Firm 2 hires a smart lobbyist who convinces the government that its profits are relatively low andthat it therefore deserves a generous allowance allocation. The government agrees and allocatesa1 = 20 allowances to firm 1 (for free) and a2 = 40 allowances to firm 2 (for free).b. What are the firms’ profits? Do any of the firms earn windfall profits? [Hint: compareprofits with and without regulation.] Windfall profits have been sharply criticized by consumer advocacy groups and politicians.c. What can…
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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…
EOC 11.04 Two businesses, X and Y, each dump 20 tonnes of pollution into a creek. In an effort to reduce pollution, the government will now require businesses to have a pollution permit to dump pollutants in the creek. Each business receives 10 pollution permits and they can use it to pollute or sell it to the other business (but lose the ability to pollute). To reduce pollution it costs business X $100 per tonne of pollutant eliminated and it costs business Y $50 per tonne of pollutant eliminated. Once the two businesses have traded these permits with each other, what is the likely outcome? Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a business X emits 10 tonnes of pollutants and business Y emits 10 tonnes of pollutants. b business X no longer pollutes, and business Y will not lower the amount it pollutes. business X raises its pollution, and business Y will lower how much it pollutes. business Y no longer pollutes, and…
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A city currently emits 15 million gallons (MG) of raw sewage into a lake that is beside the city. Table 12.13 shows the total costs (TC) in thousands of dollars of cleaning up the sewage to different levels, together with the total benefits (TB) of doing so. Benefits include environmental, recreational, health, and industrial benefits. Using the information in Table 12.13 calculate the marginal costs and marginal benefits of reducing sewage emissions for this City. What is the optimal level of sewage for this city? How can you tell?
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.
This graph represents the tobacco industry. IPrice 16 14 Social Cost 12 10 Private Cost 8 6 4 Demand 200 500 650 Quantity a) Without any government intervention, what is the market determined price and quantity? b) What is the price of the externality? c) What is the socially optimal price and quantity? d) What should the government do (impose a tax or provide a subsidy) to internalize this externality? What is the amount of the the corrective tax/subsidy needed to be to move the outcome from the market equilibrium to the socially-optimal outcome?
urgently need solution of J,K,L subparts please
Assume that the market for tradable emissions permits by power plants has been operating efficiently for severalyears. An engineering firmthen invents a lower cost device for pollution abatement. What happens to theequilibrium market price of a tradable permit, and why? Draw a supply and demand diagram, with a fixedsupply of pollution permits, along with your answer.Has the socially optimal amount of pollution increasedor decreased? Explain
a) If the total benefits to society of achieving some specific level of pollution control aresignificantly greater than the total costs to society of doing so, will it necessarily beeconomically efficient (socially optimal) to do so? Explain your answer with words and agraph.b) In March 2011, the US EPA issued a report that looked at the results of the Clean Air Actfrom 1990 to 2020 (see: http://www.epa.gov/air/sect812/prospective2.html). This reviewfound that in the central estimate of the CAA’s impact, benefits exceeded costs by a ratio of30 to 1. This leads some environmental policy commentators to conclude that the EPA hadnot gone far enough in reducing air pollution. Under what conditions would a benefit costratio of 30:1 imply that it would be economically efficient to further reduce air pollutionunder the CAA? Assuming the EPA’s benefit-cost estimate is correct, is it possible that itcould actually be economically efficient to loosen, rather than strengthen, air…
20 Supply Social Value 18 16 14 PRICE ㄓ 12 10 8 6 4 2 Demand 24 6 8 10 12 14 16 18 20 QUANTITY The graph indicates what type of externality? Positive In this type of market failure, is the quantity over-provided or under- provided? By how much? What is the socially optimal price? over-provided by 2 units $10 What is the socially optimal quantity? 10 units What is the market failure price? $8 What is the market failure quantity? 8 units

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