Foundations of Economics (8th Edition)
8th Edition
ISBN: 9780134486819
Author: Robin Bade, Michael Parkin
Publisher: PEARSON
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Chapter 10, Problem 2SPPA
To determine
The quantity of electricity produced, marginal
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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?
Define pollution charge and will our economy be able to control pollution? Share your thoughts in a paragraph.
The table below shows the demand for pollution permits to emit hydrocarbons in a particular industrial park. Each permit allows the owner to release one tonne of pollutants into the atmosphere.
Price perPollution Permit
Quantity of Permits
$4,500
75
4,000
150
3,500
225
3,000
300
2,500
375
2,000
450
1,500
525
a. If no fee for a pollution permit were charged, how many tonnes of pollutants would be discharged into the atmosphere, assuming a straight-line demand curve? Quantity: tonnesb. Suppose government were to set a fee of $3,500 per pollution permit. How many tonnes of pollutants would now be dumped? What is the total revenue received by government? Quantity: tonnes
Total revenue: $ c. Suppose that a new technology allows for a significant reduction in hydrocarbons at a relatively low cost so that the demand for pollution permits in the industrial park drops by 150 tonnes. Assuming that government holds the permit fee at $3,500, how many tonnes of…
Chapter 10 Solutions
Foundations of Economics (8th Edition)
Ch. 10 - Prob. 1SPPACh. 10 - Prob. 2SPPACh. 10 - Prob. 3SPPACh. 10 - Prob. 4SPPACh. 10 - Prob. 5SPPACh. 10 - Prob. 6SPPACh. 10 - Prob. 7SPPACh. 10 - Prob. 8SPPACh. 10 - Prob. 9SPPACh. 10 - Prob. 10SPPA
Ch. 10 - Prob. 1IAPACh. 10 - Prob. 2IAPACh. 10 - Prob. 3IAPACh. 10 - Use the following information to work Problems 3...Ch. 10 - Prob. 5IAPACh. 10 - Prob. 6IAPACh. 10 - Prob. 7IAPACh. 10 - Prob. 8IAPACh. 10 - Prob. 9IAPACh. 10 - Prob. 1MCQCh. 10 - Prob. 2MCQCh. 10 - Prob. 3MCQCh. 10 - Prob. 4MCQCh. 10 - Prob. 5MCQCh. 10 - Prob. 6MCQ
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