Foundations of Economics (8th Edition)
8th Edition
ISBN: 9780134486819
Author: Robin Bade, Michael Parkin
Publisher: PEARSON
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Chapter 10, Problem 3SPPA
To determine
To calculate:
The quantity of electricity generated, the price of electricity, the size of the pollution tax and the tax revenue, when the government's pollution tax leads the utility to produce the efficient quantity.
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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…
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?
Table 1 shows the demand schedule for electricity from a coal burning utility.
Table 2 shows the utility's cost of producing electricity and the external cost of the pollution
created.
With no pollution control, calculate the quantity of electricity produced, the price of electricity, and
the marginal external cost of the pollution generated.
With no pollution control, the quantity of electricity produced is
The price of electricity is cents a kilowatt.
kilowatts a day.
Table 1
Table 2
Price
(cents per kilowatt)
4
8
12
16
20
24
Quantity
(kilowatts
per day)
0
100
200
300
400
500
Marginal
cost
0
2
4
6
8
10
Quantity demanded
(kilowatts per day)
500
400
300
200
100
0
Marginal
external cost
(cents per kilowatt)
0
2
4
6
8
10
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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