Microeconomics
11th Edition
ISBN: 9781260507140
Author: David C. Colander
Publisher: McGraw Hill Education
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Chapter 2.1, Problem 7Q
To determine
Person St and Person Sa are better off specializing in their baking activities using the
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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
The diagram to the right illustrates a competitive industry
in which there is a negative production externality. If a tax
equal to $20/unit (i.e., a tax equal to the marginal
external cost) is imposed, then the net social benefit will
OA. fall by area A+ C.
OB. rise by area B+C.
OC. fall by area C.
OD. rise by area B.
OE. None of the above.
W
Marginal Benefit, Marginal Cost ($)
50
MCS
MCp
45
35
30-
25
20
15
10-
5
0-
0
B
D
10 20 30 40 50 60 70 80 90 100 110
Quantity
-6°C Mostly clear
Next
Chapter 2 Solutions
Microeconomics
Ch. 2.1 - Prob. 1QCh. 2.1 - Prob. 2QCh. 2.1 - Prob. 3QCh. 2.1 - Prob. 4QCh. 2.1 - Prob. 5QCh. 2.1 - Prob. 6QCh. 2.1 - Prob. 7QCh. 2.1 - Prob. 8QCh. 2.1 - Prob. 9QCh. 2.1 - Prob. 10Q
Ch. 2.A - Prob. 1QECh. 2.A - Prob. 2QECh. 2.A - Prob. 3QECh. 2.A - Prob. 4QECh. 2.A - Prob. 5QECh. 2.A - Prob. 6QECh. 2.A - Prob. 7QECh. 2.A - Prob. 8QECh. 2 - Prob. 1QECh. 2 - Prob. 2QECh. 2 - Prob. 3QECh. 2 - Prob. 4QECh. 2 - Prob. 5QECh. 2 - Prob. 6QECh. 2 - Prob. 7QECh. 2 - Prob. 8QECh. 2 - Prob. 9QECh. 2 - Prob. 10QECh. 2 - Prob. 11QECh. 2 - Prob. 12QECh. 2 - Prob. 1QAPCh. 2 - Prob. 2QAPCh. 2 - Prob. 3QAPCh. 2 - Prob. 4QAPCh. 2 - Prob. 5QAPCh. 2 - Prob. 1IPCh. 2 - Prob. 2IPCh. 2 - Prob. 3IPCh. 2 - Prob. 4IPCh. 2 - Prob. 5IPCh. 2 - Prob. 6IP
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