Despite the logic of the Coase theorem,private actors often fail to resolve theproblems caused by negative environmentalexternalities on their own due to hightransaction costs.O TrueO False A market for pollution permits canefficiently allocate the right to pollutethrough the market forces of supply anddemand.TrueFalse

Externalities refer to the cost or benefit of an economic transaction incurred on a third party who…

Answered: Despite the logic of the Coase theorem,…

Despite the logic of the Coase theorem, private actors often fail to resolve the problems caused by negative environmental externalities on their own due to high transaction costs. True False

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter8: Market Failure

Section: Chapter Questions

Problem 4P

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The supply and demand of sugar are given as Qs = 5P, Qd = 250- P where Qs is tons supplied per year, P is the price per ton; Qd is tons demanded per year. Because of the pollution associated with production, marginal external costs of 40 are associated with each ton of sugar. Assuming that sugar is sold in a competitive market, What is the market price? How many tons of paper will be produced per year at that price? What is the efficient output of paper? What is the amount of total Pigouvian tax to achieve efficiency? What is the amount of total Pigouvian subsidy to achieve efficiency? Expert Answer
The supply and demand of sugar are given as Qs = 5P, Qd = 250- P where Qs is tons supplied per year, P is the price per ton; Qd is tons demanded per year. Because of the pollution associated with production, marginal external costs of 40 are associated with each ton of sugar. Assuming that sugar is sold in a competitive market, What is the market price? How many tons of paper will be produced per year at that price? What is the efficient output of paper? What is the amount of total Pigouvian tax to achieve efficiency? What is the amount of total Pigouvian subsidy to achieve efficiency?