1 Suppose the owners of the three firms get together and agree on a trading price of $800 per permit.Complete the following table with the action each firm will take at this permit price and the amount of pollution each firm will eliminate.Initial Pollution Permit AllocationFinal Amount of Pollution EliminatedFirm(Tons of pollution)Action(Tons of pollution)Firm XFirm YBuy one permitFirm ZBuy two permitsDon't buy/sellSell one permitDetermine the total cost of eliminating 6 tons of polethod, and enter the amounts in the following table.Sell two permitsTotal Cost of EliminlbllutionMethod(Dollars)RegulationTradable pollution permitsIn this cise, using tradable pollution permits reduces 6 tons of pollution atusing regulation. 3. Working with Numbers and Graphs Q3Suppose the government wants to reduce the total pollution emitted by three firms. Currently, each firm is creating 4 tons of pollution, for a total of12 tons. The government is considering the following two methods to reduce total pollution to 6 tons:1. The government sets regulation specilying that each of the three firms must cut its pollution in half.2 The government allocates two tradable pollution permits to each of the three firms. Each permit allows the firm to emit 1 ton ofpollution. Assume the negotiation and exchange of permits are costless.The following table shows the cost eachy firm faces to eliminate each unit of pollution.Cost of Eliminating:Firm X Ficm YFirm ZFirst ton of pollution$280$600$950Second ton of pollution$300$720$1,650Third ton of pollution$350$880$2,500Fourth ton of pollution$450$1,050$3,550Suppose the owners of the three firms get together and agree on a trading price of $800 per permit.

1) Cost of eliminating two term of pollution by every firm, Firm X 280+300 580 Firm Y 600+720…

ete the following table with the action each firm will take at this permit price and the amount of pollution each fir Initial Pollution Permit Allocation Final Amount of Pollution Eliminates (Tons of pollution) Action (Tons of pollution) 2. Buy one permit Buy two permits Don't buy/sell Sell one permit ine the total cost of eliminating 6 tons of poll ethod, and enter the amounts in the following ta Sell two permits Total Cost of Elimin bllution Method (Dollars) Regulation

ete the following table with the action each firm will take at this permit price and the amount of pollution each fir Initial Pollution Permit Allocation Final Amount of Pollution Eliminates (Tons of pollution) Action (Tons of pollution) 2. Buy one permit Buy two permits Don't buy/sell Sell one permit ine the total cost of eliminating 6 tons of poll ethod, and enter the amounts in the following ta Sell two permits Total Cost of Elimin bllution Method (Dollars) Regulation

Principles of Microeconomics

7th Edition

ISBN:9781305156050

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter10: Externalities

Section: Chapter Questions

Problem 10PA

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Similar questions

Classify the following pollution-control policies as command-and-control or market incentive based. A state emissions tax on the quantity of carbon emitted by each firm. The federal government requires domestic auto companies to improve car emissions by 2020. The EPA sets national standards for water quality. A city sells permits to films that allow them to emit a specified quantity of pollution. The federal government pays fishermen to preserve salmon.
In the Land of Purity, there is only one form of pollution, called gunk. Table 12.14 shows possible combinations of economic output and reduction of gunk, depending on what kinds of environmental regulations you choose. Sketch a graph of a production possibility frontier with environmental quality on the horizontal axis, measured by the percentage reduction of gunk, and with the quantity of economic output on the vertical axis. Which choices display productive efficiency? How can you tell? Which choices show allocative efficiency? How can you tell? In the choice between K and L, can you say which one is better and why? In the choice between K. and N, can you say which one is better, and why? If you had to guess, which choice would you think is move likely to represent a command-and-control environmental policy and which choice is more likely to represent a market-oriented environmental policy, choice L or M? Why?
An emissions tax on a quantity of emissions from a film is not a command-and-control approach to reducing pollution. Why?
Assume that the marginal private costs of a film producing fuel-efficient can; is greater than the marginal social costs. Assume that the marginal private benefits of a firm producing fuel efficient cars are the same as the marginal social benefits. Discuss one wags.r that the government cans ï¬‚y to increase production and sales of fuel efficient cars to the socially desirable amount. Hint: the government is flying to affect production through costs, net benefits.
(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.
The rows in Table 12.7 show three market-oriented tools for reducing pollution. The columns of the table show three complaints about command-and-control regulation. Fill in the table by stating briefly how each market-oriented tool addresses each of the three concerns.
How can high-income countries benefit from covering much of the cost of reducing pollution created by low-income countries?
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?
Table 12.5 provides the supply and demand conditions for a manufacturing film. The third column represents a supply curve without accounting for the social cost of pollution. The fourth column represents the supply curve when the film is required to account for the social cost of pollution. Identify the equilibrium before the social cost of production is included and after the social cost of production is included.
Suppose a city releases 16 million gallons of raw sewage into a nearby lake. Table 12.8 shows the total costs of cleaning up the sewage to different levels, together with the total benefits of doing so. (Benefits include environmental, recreational, health, and industrial benefits.) Using the information in Table 12.8, calculate the marginal costs and marginal benefits of reducing sewage emissions for this city. See Production, Costs and Industry Structure if you need a refresher on how to calculate marginal costs. What is the optimal level of sewage for this city? Why not just pass a law that films can emit zero sewage? After all, the total benefits of zero emissions exceed the total costs.