Essentials of Economics (MindTap Course List)
8th Edition
ISBN: 9781337091992
Author: N. Gregory Mankiw
Publisher: Cengage Learning
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Chapter 10, Problem 5CQQ
To determine
Corrective tax for pollution.
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The following companies all manufacture widgets and dump tons of glop into the air.
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pollution (tons of glop)
200
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Smog Brothers, Inc.
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100
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The government wants to halve total pollution but does not know how much it will cost each company. the government
employs a tradable permit scheme in which it gives the same number of permits to each manufacturer at no cost, the total
cost of cleanup for Smog Brothers, Inc., after the exchange of permits, is $
7,000
6,000
13,000
200
200
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…
If producing a good generates pollution (a negative externality), from a social perspective ...
a. the price will be too low and the quantity produced will be too low.
b. the price will be too low and the quantity produced will be too high.c. the price will be too high and the quantity produced will be too low.
d. the price will be too high and the quantity produced will be too high.
e. the price will be too low but the quantity produced will be correct.
Chapter 10 Solutions
Essentials of Economics (MindTap Course List)
Ch. 10.1 - Prob. 1QQCh. 10.2 - Prob. 2QQCh. 10.3 - Prob. 3QQCh. 10 - Prob. 1CQQCh. 10 - Prob. 2CQQCh. 10 - Prob. 3CQQCh. 10 - Prob. 4CQQCh. 10 - Prob. 5CQQCh. 10 - Prob. 6CQQCh. 10 - Prob. 1QR
Ch. 10 - Prob. 2QRCh. 10 - Prob. 3QRCh. 10 - Prob. 4QRCh. 10 - Prob. 5QRCh. 10 - Prob. 6QRCh. 10 - Prob. 1PACh. 10 - Prob. 2PACh. 10 - Greater consumption of alcohol leads to more motor...Ch. 10 - Prob. 4PACh. 10 - The many identical residents of Whoville love...Ch. 10 - Prob. 6PACh. 10 - Prob. 7PACh. 10 - Prob. 8PACh. 10 - Prob. 9PA
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- Draw a standard supply and demand diagram for televisions, and indicate the equilibrium price and output. a. Assuming that the production of televisions generates external costs, illustrate the effect of the producers being forced to pay a tax equal to the external costs generated, and indicate the equilibrium output. b. If instead of generating external costs, television production generates external benefits, illustrate the effect of the producers being given a subsidy equal to the external benefits generated, and indicate the equilibrium output.arrow_forwardShow the market for cigarettes in equilibrium, assuming that there are no laws banning smoking in public. Label the equilibrium private market price and quantity as Pm and Qm. Add whatever is needed to the model to show the impact of the negative externality from second-hand smoking. (Hint: In this case it is the consumers, not the sellers, who are creating the negative externality.) Label the social optimal output and price as Fe and Qe. On the graph, shade in the deadweight loss at the market output.arrow_forwardThe rows in Table 12.7 show three market-oriented tools for reducing pollution. The columns of the table show three complaints about command-and-control regulation. Fill in the table by stating briefly how each market-oriented tool addresses each of the three concerns.arrow_forward
- The many identical residents of Whoville love drinking Zlurp. Each resident has the following willingness to pay for the tasty refreshment: a. The cost of producing Zlurp is 150, and the competitive suppliers sell it at this price. (The supply curve is horizontal.) How many bottles will each Whovillian consume? What is each persons consumer surplus? b. Producing Zlurp creates pollution. Each bottle has an external cost of 1. Taking this additional cost into account, what is total surplus per person in the allocation you described in part (a)? c. Cindy Lou Who, one of the residents of Whoville, decides on her own to reduce her consumption of Zlurp by one bottle. What happens to Cindys welfare (her consumer surplus minus the cost of pollution she experiences)? How does Cindys decision affect total surplus in Whoville? d. MayorCrinch imposes a 1 tax on Zlurp. What is consumption per person now? Calculate consumer surplus, the external cost, government revenue, and total surplus per person. e. Based on your calculations, would you support the mayors policy? Why or why not?arrow_forwardMacmillan Learning The accompanying schedule depicts the marginal social cost (MSC) and the marginal social benefit (MSB) associated with pollution emissions. Assume the polluters bear none of the social cost of pollution and all of the benefits. Quantity is measured in tons. Social Cost- Benefit Schedule Q MSB MSC What is the socially optimal amount of pollution? 9 tons 7 tons 8 tons 0 tons What is the size of the tax that would move the market to this socially optimal quantity? What is the size of the tax that would move the market to this socially optimal quantity? $135 per ton $105 per ton $120 per ton $150 per ton 4 180 60 09 5 165 75 75 6 150 90 00 7 135 105 8 120 120 9 105 135 10 90 150 = 11 75 165 12 60 00 180 13 45 195 14 30 210 15 15 225 16 0 240arrow_forwardThe government auctions off 500 units of pollut ionrights. They sell for $50 per unrt, raising total revenueof $25,000. This policy is equivalent to a correctivet ax of __ per unit of pollution.a. $10b. $50c . $450d. $500arrow_forward
- Draw a graph of water pollution as a negative externality and explain itarrow_forwardWhen studying pollution and the environment, economists A) emphasize costs and benefits. B) attempt to reduce pollution at all costs. C) think pollution is good if it occurs when production takes place. D) have no role to play. E) concentrate on the physical aspects of the environment.arrow_forwardIf policymakers use a pollution tax to control pollution, the tax per unit of pollution should be set A. equal to the marginal external cost at the economically efficient level of pollution. B. equal to the marginal private cost of production at the economically efficient level of pollution. C. equal to the amount of the deadweight loss created in the absence of a pollution tax. D. at a level low enough so that producers can pass along a portion of the additional cost onto consumers without significantly reducing demand for the product.arrow_forward
- Which of the following describes the effect of an optimal tax on pollution?Select one:a. a benevolent social planner is able to maximize productionb. producers choose not to produce any pollutionc. the value to consumers at market equilibrium exceeds the cost of production (including tax)d. producers internalize the cost of the pollutionarrow_forwardcap and trade Review The government wants to reduce total pollution from 180 units to 120 units. To be fair, it requires the each firm reduce their pollution by 20 units each. The total cost of the reduction is Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a $1350 b. $900 $1500 $1200arrow_forwardOnly typed answer You are an industry analyst that specializes in an industry where the market inverse demand is P = 100 - 3Q. The external marginal cost of producing the product is MCExternal = 6Q, and the internal cost is MCInternal = 14Q. Instruction: Round your answers to the nearest two decimal places. a. What is the socially efficient level of output? units b. Given these costs and market demand, how much output would a competitive industry produce? units c. Given these costs and market demand, how much output would a monopolist produce? units d. Which of the following are actions the government could take to induce firms in this industry to produce the socially efficient level of output. Instructions: You may select more than one answer. Click the box with a check mark for the correct answers and click twice to empty the box for the wrong answers. You must click to select or deselect each option in order to receive full credit. Pollution taxes…arrow_forward
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