Environmentalists in Tennessee brought suit against the Champion Paper Company of North Carolina for polluting the Pigeon River,which flows from North Carolina into eastern Tennessee. Tennessee claimed that the coffee-colored water smelled bad and would notsupport fishing or swimming. Environmentalists requested that the river be restored to its pristine state, or the water quality it hadbefore the coming of industry. The Environmental Protection Agency (EPA) heard the suit and applied an efficiency standard. In otherwords, the EPA set limits on how much pollution the paper company could release (though this number was not zero).Adjust the following graph to indicate the negative externality.PRICE (Dollars per sheet)21109SupplyDemand800 1 2Demand791053 4QUANTITY (Sheets of paper)SupplyWhen the EPA imposes standards on the paper company, the quantity of paper produced willcompany will. The new equilibrium price is $, and the price of paper from thisper sheet of paper, whereas the new equilibrium quantity issheets of paper.

the quantity of paper produced will decrease , and the price of paper from this company will…

Answered: Environmentalists in Tennessee brought…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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BN12.2 (a) Case: The market for dry cleaning is reflected by the demand and supply curves (Q is in thousands): Pa = 5-Q Ps= 2+2Q Producing dry cleaning creates ground water pollution with a constant marginal external cost of 1.2. Question: (a) Sketch a graph that shows the Dsoc, Spriv, Ssoc, Qopt (societal perspective) and DWL in an unregulated market (No need to label the values in the graph)?
Given the following information: Initially, a perfectly competitive market for a product is in equilibrium, with an upward-sloping straight-line market supply curve, a downward-sloping straight-line market demand curve, and a market price of $30 per unit. Consumption of this product causes pollution. Initially, the marginal external cost of the pollution caused by consuming the product is $9 per unit. There is no government policy toward the externality. The government then mandates a shift to a new product version, and all firms adopt and produce the latest version. Consumers view the new product version as equally as good as the initial product version. Consumption of the new version of the product causes less pollution, and the marginal external cost decreases by $3 per unit. For each firm, production of the new product version does not change fixed cost, but it does increase average variable cost by $3 per unit. If necessary, the market adjusts to a new equilibrium. There is…
Provide a brief explanation for regulation of mobile-source pollution is neither focused exclusively onproducers or exclusively on consumers.
Explain the connection between the following two concepts: Producer surplus and Benefits of a regulation on pollution.
Explain what is meant by a good being “excludable.”
Large taxes on energy companies whose production activities cause environmental damage. How does this negative externality affect the allocation of resources? List three things. Include pigovian taxes and marginal costs.
In 1998, California became the first state to adopt rules requiring many sport utility vehicles, pickups, and minivans to meet the same pollution standards as regular cars, effective in 2004. As the deadline drew near, a business group (which may have an incentive to exaggerate) estimated that using the new technology to reduce pollution would increase vehicle prices by as much as $7,000. A spokesperson for the California Air Resources Board, which imposed the mandate, said that the additional materials cost was only about $70 to $270 per vehicle. Suppose that the two major producers are Toyota and Ford, and these firms were price setters with differentiated products. Show the effect of the new regulation. Is it possible that the price for these vehicles would rise by substantially more than the marginal cost would? Explain your answer.
Consider a lake found in the town of Center Barnstead, and then answer the questions that follow. The town has a campground whose visitors use the lake for recreation. The town also has a fish cannery that dumps industrial waste into the lake. This pollutes the lake and makes it a less desirable vacation destination. That is, the fish cannery's waste decreases the campground's economic profit. Suppose that the fish cannery could use a different production method that involves recycling water. This would reduce the pollution in the lake to levels safe for recreation, and the campground would no longer be affected. If the fish cannery uses the recycling method, then the fish cannery's economic profit is $1,500 per week, and the campground's economic profit is $1,800 per week. If the fish cannery does not use the recycling method, then the fish cannery's economic profit is $2,000 per week, and the campground's economic profit is $1,000 per week. These figures are summarized…
In the market for travel, what is true about the relationship between the market equilibrium (n) and the socially optimal equilibrium (nº) amount of travel when there is zero negative externality? The market equilibrium amount of travel is greater than the socially optimal amount of travel The market equilibrium amount of travel is less than the socially optimal amount of travel The market equilibrium amount of travel is equal to socially optimal amount of travel
Suppose that a firm producing copper is dumping mine tailings into the river. Assume that the price of the product represents both its private and social benefit to society. The firm incurs costs listed below under MCp for each additional ton of copper produced. The mine tailings, though, lower the dissolved oxygen levels in the river resulting in fewer fish. Given fewer fish, the local people downstream must fish longer hours. For each additional ton of copper produced, this added cost to the local people is represented by MCE. These costs are represented below. P MCP MCE $30 $10 $4 $30 $18 $6 $30 $25 $8 $30 $31 $10 $30 $45 $12 What will be the market level of output (tons)? 2. 3. 1.
Explain why, in the absence of governmental environmental regulation, competitive markets overproduce goods whose production involves the creation of negative externalities. Provide an example of a good that generates a negative externality.
Suppose that a firm producing copper is dumping mine tailings into the river. Assume that the price of the product represents both its private and social benefit to society. The firm incurs costs listed below under MCp for each additional ton of copper produced. The mine tailings, though, lower the dissolved oxygen levels in the river resulting in fewer fish. Given fewer fish, the local people downstream must fish longer hours. For each additional ton of copper produced, this added cost to the local people is represented by MCE. These costs are represented below. P MCp MCE 1 $30 $10 $4 $30 $18 $6 $30 $25 $8 $30 $31 $10 $30 $45 $12 What will be the socially efficient level output (tons)? 2) 4.

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