11. Suppose there are 2 types of firms which emit some uniformly-mixed pollution. We'll assume that they are all in different industries and that there are many individual firms. This usually gives the best opportunity for a smoothly functioning market for permits to develop. There are older, not very profitable firms and newer, more profitable firms. The old firms have many long-term employees and have a lot of political clout. The older firms could probably cause a big enough stir to quash any regulatory scheme that cost them money. The new firms have a lot less political clout. Initial Emissions Older Firms $5 100 Newer Firms $3 200 MAC Number of Firmst 40 30 I a. Describe what would happen if a permit scheme was implemented whereby each firm was allocated (given) permits equal to 40% of its initial emissions. b. Design a permit scheme that would not cost the older firms anything, but would still reduce emissions by 60% overall.

11. Suppose there are 2 types of firms which emit some uniformly-mixed pollution. We'll assume that they are all in different industries and that there are many individual firms. This usually gives the best opportunity for a smoothly functioning market for permits to develop. There are older, not very profitable firms and newer, more profitable firms. The old firms have many long-term employees and have a lot of political clout. The older firms could probably cause a big enough stir to quash any regulatory scheme that cost them money. The new firms have a lot less political clout. Initial Emissions Older Firms $5 100 Newer Firms $3 200 MAC Number of Firmst 40 30 I a. Describe what would happen if a permit scheme was implemented whereby each firm was allocated (given) permits equal to 40% of its initial emissions. b. Design a permit scheme that would not cost the older firms anything, but would still reduce emissions by 60% overall.

Principles of Microeconomics

7th Edition

ISBN:9781305156050

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter10: Externalities

Section: Chapter Questions

Problem 5PA

See similar textbooks

Similar questions

Consider the case of global environmental problems that spill across international borders as a prisoners dilemma of the sort studied in Monopolistic Competition and Oligopoly. Say that there are two countries, A and B. Each country can cheese whether to protect the environment, at a cost of 10, or not to protect it, at a cost of zero. If one country decides to protect the environment, there is a benefit of 16, but the benefit is divided equally between the two countries. If both countries decide to protect the environment, there is a benefit of 32, which is divided equally between the two centuries. In Table 12.10, fill in the costs, benefits, and total payoffs to the countries of the following decisions. Explain why, without some international agreement, they are likely to end up with neither country acting to protect the environment.
How can high-income countries benefit from covering much of the cost of reducing pollution created by low-income countries?
In a market without environmental regulations, will the supply curve for a film account for private costs, external costs, both, or neither? Explain.
What is a pollution charge and what incentive does it provide for a firm to take external costs into account?
(External Costs with Variable Technology) Think of an industry that pollutes the water and has access to variable technology for reducing that pollution. Graphically illustrate and explain the impact of each of the following, other things constant, on the optimal level of water quality: a. New evidence is discovered about a greater risk of cancer from water pollution. b. The cost of pollution-control equipment increases. c. A technological improvement reduces the cost of pollution control.
What is a marketable permit and what incentive does it provide for a firm to account for external costs?
Suppose that Sonys R. Is this a private or social benefit?
Refer to Table 12.2. The externality created by the refrigerator production was 100. However, once we accounted for both the private and additional external costs, the market price increased by only 50. If the external costs were 100 why did the price only increase by 50 when we accounted for all costs?
Consider two approaches to reducing emissions of CO2 into the environment from manufacturing industries in the United States. In the first approach, the U.S. government makes it a policy to use only predetermined technologies. In the second approach, the U.S. government determines which technologies are cleaner and subsidizes their use. Of the two approaches, which is the command-and-control policy?
A city currently emits 15 million gallons (MG) of raw sewage into a lake that is beside the city. Table 12.13 shows the total costs (TC) in thousands of dollars of cleaning up the sewage to different levels, together with the total benefits (TB) of doing so. Benefits include environmental, recreational, health, and industrial benefits. Using the information in Table 12.13 calculate the marginal costs and marginal benefits of reducing sewage emissions for this City. What is the optimal level of sewage for this city? How can you tell?
Table 12.12, shows the supply and demand conditions for a firm that will play trumpets on the streets when requested. QS1 is the quantity supplied without social costs. QS2 is the quantity supplied with social costs. What is the negative externality in this situation? Identify the equilibrium price and quantity when we account only for private costs, and then when we account for social costs. How does accounting for the externality affect the equilibrium price and quantity?
As the extent of environmental protection expands, would you expect marginal costs of environmental protection to rise or fall? Why or why not?