Economics: Principles & Policy
14th Edition
ISBN: 9781337696326
Author: William J. Baumol; Alan S. Blinder; John L. Solow
Publisher: Cengage Learning
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Question
Chapter 16, Problem 4TY
To determine
Impact on pollution emission when tax is imposed.
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Define pollution charge and will our economy be able to control pollution? Share your thoughts in a paragraph.
Imagine the government of California has proposed a new tax on vehicles based on the amount of emissions they produce in a year. In 2019, there will be 20 tons of emissions produced. The governor’s office has run the calculations and found that the socially optimal level is 14 tons and the marginal damage from each unit of pollution is $150.
Imagine there are two types of drivers in California: commuters and non-commuters. Imagine that the marginal cost of reducing pollution for commuters is MCA_C=150Q and the marginal cost of reducing pollution for non-commuters is MCA_N=30Q. Each type initially created ten tons of pollution each. Their total cost of reductions is equal to TCA_C=75Q^2 and TCA_N=15Q^2. How much would each type choose to reduce under the tax?
Imagine the governor instead suggested forcing all drivers to reduce their emissions by 30% from their 2019 levels. How would the costs of reduction here compare to the taxation case (please provide actual numbers)? Do you…
Use this prompt to answer the following questions about tradeable permits.
Two firms each currently dump 20 tons of pollution a piece into a local river. The government
wants to reduce the amount of pollution in the river so they issue 5 permits to each firm. The
cost for firm A to reduce their pollution by 1 ton is $1000 and the cost for firm B to reduce
their pollution by 1 ton is $800.
When answering the questions below simply enter the number for your answer do not write
a full sentence.
Question 1
If trade is NOT allowed what will be the cost of reducing pollution will be
for firm A,
for firm B, and
in total.
3 pts
Chapter 16 Solutions
Economics: Principles & Policy
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- Why has supply and demand failed to prevent pollution?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_forwardIn 300-500 words, describe two examples of positive externalities and two examples of negative externalities in the real world. Pollution doesn't count..arrow_forward
- The following companies all manufacture widgets and dump tons of glop into the air. Manufacturer Cost to clean up 1 ton of glop Current contribution to overall pollution (tons of glop) 200 Polluters-R-Us Smog Brothers, Inc. Really Dirty Industries 0 $ 70 100 30 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 200arrow_forward2 The equation for the marginal cost of reductions is P=1+R*2 The equation for the marginal benefit of reductions is P=33-R*2 What is the Pigouvian tax for this pollutant? How much pollution would exist if that Pigouvian tax was charged?arrow_forwardTable 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 10arrow_forward
- Suppose you want to put a dollar value on the external costs of carbon emissions from a power plant. What information or data would you obtain to measure the external (not social) cost?arrow_forwardassume you are an average american driver. using the 2014 emission totals, how many pounds of nox emission are you responsible for creating? how many pounds would you prevent if you were to reduce by half of the vehicle miles you travel? what percentage of your total nox emissions would that be?arrow_forwardCap and Trade policies are among the best environmental policies being used. However, it can be argued that they allow inefficient, high polluting sources to continue polluting. Is there a better way? What changes if any, would you make if you were the head of the EPA (Environment Protection Agency).arrow_forward
- In what ways is pollution still a problem?arrow_forwardSuppose a country has two airlines. One is a small domestic airline that uses modern airplanes with lower CO2 emissions, and the other is a large international airline that uses older jumbo jets carrying hundreds of people at one time. A carbon emissions tax on airlines would be more efficient than a strict limit (command and control) on the total amount of carbon emissions each airline can produce. Two reasons that support this statement are: a. A carbon emissions tax would a.allow the larger airline to continue using its less efficient airplanes b.not allow the large airline to continue using its less efficient airplanes . b. A command-and-control policy would likely a.allow the larger airline to continue its service. b.force the larger airline to curb its service.arrow_forwardītion, please answer the following questions: If society wishes to reduce pollution, why is it more efficient to tax the pollution rather than set a limit on pollution? 2. Why is it more efficient to tax pollution than to tax the output that produces pollution?arrow_forward
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