Microeconomics
Microeconomics
11th Edition
ISBN: 9781260507140
Author: David C. Colander
Publisher: McGraw Hill Education
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Chapter 8, Problem 4QE
To determine

The impact of imposing higher tax on oil.

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What are pollution havens? How are they created or why do they exist? Why do economists think they may change over time and develop policies to reduce pollution?
It’s common to think that reducing pollution is necessarily costly because to reduce pollution we need to tax firms who will then produce less. But can you think of one example in which pollution might not only be unpleasant but might actually reduce production?
Economists Kenneth Chay and Michael Greenstone found that in the two years following the passage of the Clean Air Act of​ 1970, the sharp reduction in air pollution also led to a decline in infant deaths. Although this and other studies provide compelling evidence of the link between pollution and infant​ health, it is not clear that reductions from the much lower levels of ambient pollution today would have the same effect. Which of the following reasons could explain​ this?   A. ​Today, the level of pollution is much higher.​ Therefore, it will take a much larger reduction in air pollution to reap benefits similar to those in 1970.     B. When levels of pollution are​ high, the marginal benefit of reducing pollution also is high. It follows therefore that the benefit of reducing air pollution in 1970 would be much higher than the benefit from a proportional reduction in air pollution today when the level of pollution is much lower.   C. When levels of pollution are​…

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