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- Why are taxes, one traditional remedy for negative externalities, less than ideal for smoking cessation in the United States? Nicotine is addictive/demand is inelastic, and smokers are mostly poor, so in effect cigarette taxes reduce the quality of life of people we’re trying to help without substantially reducing smoking Demand is inelastic, and smokers are mostly rich, so they don’t reduce smoking as a result of taxes Demand is elastic, and smokers are mostly old, so taxes reduce smoking but cause increased anxiety among the elderly Demand is elastic, and smokers are mostly young, so they quit smoking but are then more likely to experiment with illegal drugsCorrecting for negative externalities - Regulation versus tradablepermits Suppose a municipality votes to reduce the combined pollution introduced by three local companies. Presently, each firm creates 4 units of pollution in the area, for a total of 12 pollution units. The government can reduce total pollution in the area to 6 units by choosing between the following two methods: Methods to Reduce Pollution 1. The government imposes pollution standards using regulation. 2. The government issues tradable pollution permits. The costs faced by each firm are different, so it is more difficult for some firms to reduce pollution than others. The following table shows the cost faced by each firm to eliminate each unit of pollution. Assume that the cost of eliminating all 4 units of pollution (that is, reducing pollution to zero) is prohibitively expensive for all three firms. Firm Cost of Eliminating the... First Unit of Pollution Second Unit of Pollution…Which of the following statements best describes the EPA economic justice initiative? A.)This consists of a panel of leading economists who conduct research on climate change policy. B.)This organization has taken a more vocal position in recent years that carbon emissions must be reduced. C.)This is a form of regulation intended to reduce the negative effect of externalities. D.)This is part of the United Nations Framework Convention on Climate Change.
- The proposition that problems of externalities will be resolved efficiently through private exchange is known as Property rights Pollution abatement Coase theorem Tort lawhow does the control environment relate to audit planning? Explain clearly, concisely and briefly.A number of coal burning steam locomotives pass by several largely populated towns each day spewing sulfur dioxide. Each coal burning steam locomotive is owned by a different company. a. Explain how the Coase theorem could work to achieve the optimal level of sulfur dioxide emissions. Explain how the achievement of the optimal level of sulfur can be hindered in reality for this particular problem. b. Assume that the true marginal abatement cost curve for all firms is not known to a regulator. If the marginal damages from sulfur dioxide is fairly constant at all levels of sulfur dioxide levels, what is the better type of policy to implement, a quota or a tax on sulfur dioxide emissions? Give a brief explanation of why you have chosen that particular policy. Use a graph to support your explanation.
- Which other devision-making strategies can be applied in the public sectorContinuing with our analysis of a positive externality, in this question, we want to determine what would happen if the market was served by a monopolist. Suppose someone acquired all the firms in this industry. This new monopolist would have the exact same MC curve (the sum of the MC of the various competitive firms it acquired, also shown as S0) as shown in the introduction to Questions 5 through 7. The downward sloping demand curve would be the same as D0 (marginal private benefit curve), which does not take into account the positive externality of this good. Would the monopolist’s profit maximizing output be higher, lower, or the same as that of the competitive market? Explain your answer (no graph required). In this monopoly scenario, would the socially optimal output be higher, lower, or the same as the socially optimal output you identified for the competitive market with positive externalities in Question 6? Explain your answer (no graph required). In this monopoly scenario,…If a positive externality exists in a market, the unregulated market produces too little of a product at too low a price.
- The graph depicts market conditions for an unregulated, profit-maximizing monopolist that is unable to price discriminate. Assuming the market demand function is equivalent to marginal benefit, the socially efficient level of output in this market is 1000 units of output; deadweight loss is approximiately equal to $________ (since the MC function is not a straight line and deadweight loss is measured as the area of a triangle, it is an appoximation).Why the presence of the product variety externality does imply that there is too little entry of new firms in the market?One reason why a tradable permit system will reduce pollution more efficiently than a command-and-control approach is that, under the permit system, we expect: A. Every polluter to reduce pollution equally. B. The polluter with the lowest cost to reduce most of the pollution. C. The polluter with the highest cost to reduce most of the pollution. D.The government to dictate which polluter should reduce the most pollution.