$RсE-F5%56OULGRefer to Figure 10-7. This graph shows the market for pollution when permits are issued to firms and traded in themarketplace. The equilibrium number of permits isO a. 50.Ob. 1,000.O c. 2,000.O d. 100.UnPRICE (Dollars per unit)H&2,0001,8001,6001,4001,2001,000800600400200F810 20 30 40 50 60 70 80 90 100QUANTITY (Units of pollution)*.0088F9Supply ofPollution Permits(9JLUDemand forPollution PermitsF10O---)OF11+F12PrtSc1J[Insert

Demand curve is the downward sloping curve. Supply curve is the upward sloping curve. When supply…

PRICE (Dollars per unit) a. 50. b. 1,000. c. 2,000. d. 100. 2,000 1,800 1,600 1,400 1,200 1,000 800 600 400 200 Supply of Pollution Permits Demand for Pollution Permits 10 20 30 40 50 60 70 80 90 100 QUANTITY (Units of pollution) Refer to Figure 10-7. This graph shows the market for pollution when permits are issued to firms and traded in the marketplace. The equilibrium number of permits is

PRICE (Dollars per unit) a. 50. b. 1,000. c. 2,000. d. 100. 2,000 1,800 1,600 1,400 1,200 1,000 800 600 400 200 Supply of Pollution Permits Demand for Pollution Permits 10 20 30 40 50 60 70 80 90 100 QUANTITY (Units of pollution) Refer to Figure 10-7. This graph shows the market for pollution when permits are issued to firms and traded in the marketplace. The equilibrium number of permits is

Principles of Economics, 7th Edition (MindTap Course List)

7th Edition

ISBN:9781285165875

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter10: Externalities

Section: Chapter Questions

Problem 5QCMC

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Similar questions

In a market without environmental regulations, will the supply curve for a film account for private costs, external costs, both, or neither? Explain.
How can high-income countries benefit from covering much of the cost of reducing pollution created by low-income countries?
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.
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.
As the extent of environmental protection expands, would you expect the marginal benefits of environmental protection to rise or fall? Why or why not?
A country called Sherwood is very heavily covered with a forest of 50,000 trees. There are proposals to clear some of Sherwoods forest and grow com, but obtaining this additional economic output will have an environmental cost from reducing the number of trees. Table 12.11 shows possible combinations of economic output and environmental protection. Sketch a graph of a production possibility frontier with environmental quality on the horizontal axis, measured by the number of trees, and the quantity of economic output, measured in corn, 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 T and R, decide which one is better. Why? In the choice between T and S, can you say which one is better, and why? If you had to guess, which choice would you think is more likely to represent a command-and-control environmental policy and which choice is more likely to represent a market-oriented environmental policy, choice Q or S? Why?
As the extent of environmental protection expands, would you expect marginal costs of environmental protection to rise or fall? Why or why not?
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?
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.
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?
What are better-defined property rights and what incentive do they provide to account for external costs?
Show the market for cigarettes in equilibrium, assuming that there are no laws banning smoking in public. Label the equilibrium private market price and quantity as Pm and Qm. Add whatever is needed to the model to show the impact of the negative externality from second-hand smoking. (Hint: In this case it is the consumers, not the sellers, who are creating the negative externality.) Label the social optimal output and price as Fe and Qe. On the graph, shade in the deadweight loss at the market output.