Microeconomics
Microeconomics
10th Edition
ISBN: 9781259655500
Author: David C Colander
Publisher: McGraw-Hill Education
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Chapter 2, Problem 5QAP

(a)

To determine

The current scenario of the effects of division of labor on productivity and on human capacity by Adam smith.

(b)

To determine

The policy implications. 

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Consider an economy in which there are two polluters: A and B. The marginal cost of pollution abatement curves are given in the diagram to the right. The total cost of reducing pollution by 60 units if it is done efficiently or $ equals $ if it is done by forcing each firm to reduce pollution by 30 units. OA. 925; 1125 OB. 900; 1100 OC. 850, 1050 OD. 800, 1000 OE. None of the above The efficient levels of pollution reduction can be achieved by using a pollution tax equal to $ unit A. 25 0 per MC 45 40 35 30- 25 20- 15 10- 5- Marginal Abatement Cost ($) 10 20 30 40 50 60 70 80 Pollution Abatement -6°C Mostly clear Next 90
is initially abating Q units of pollution. Suppose that a system of tradeable pollution permits is introduced into this market and the equilibrium permit price is P* Firm B will sell permits to Firm A because OA. Firm A has lower costs of pollution abatement than Firm B. OB. Firm B's total cost of abating more pollution (area 1) is less than the revenue it earns from selling the permits (areas 5+3). OC. Firm B's total cost of abating more pollution (areas 3+1) is less than the revenue it earns from selling the permits (areas 5+3+1). OD. Firm B can buy the permits at a lower price than Firm A OE. the revenue Firm B earns from selling permits (areas 3+1) is greater than the cost it incurs from abating more pollution (area 1). Dollars per unit Q₁ Qo Q2 Pollution Abatement ил Next -6°C Mostly clear MCA MCB
The accompanying diagrams show the marginal costs of pollution abatement for two firms, Firm 1 and Firm 2. If the government requires each firm to abate Q units of pollution, the social costs of this abatement OA. could be reduced further if Firm 2 increased abatement and Firm 1 reduced its abatement by the same amount OB. could be reduced further if each firm was required to abate more. OC. could be reduced further if each firm was allowed to pollute more. OD. would be minimized. WOE could be reduced further if Firm 1 increased abatement and Firm 2 reduced its abatement by the same amount. Dollars 5 Firm 1 MC1 Q1 Q2 Q3 Q4 Q5 Q6 Q7 Abatement Q Firm 2 6- MC2 E 屈 Dollars -6°C Mostly clear Next
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