Suppose a government-provided good/service; specifically, an interstate highway, is a congestible public good. A toll on the highway with a user charge (p>$0) would be allocatively ineffioient. true or false
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Suppose a government-provided good/service; specifically, an interstate highway, is a congestible public good. A toll on the highway with a user charge
(p>$0)
would be allocatively ineffioient.
true or false
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- Distinguish between a carbon-tax and a cap-andtrade strategy for reducing carbon dioxide and other so-called greenhouse gases (that are believed by many scientists to be causing global warming). Which of the two strategies do you think would have the most political support in an election in your home state? Explain your thinking.If the true marginal abatement cost is unknown by the regulator and if the marginal benefits of abatement are steeper (more inelastic) than the marginal abatement cost, then a price instrument (emissions tax) will create less DWL than a quantity instrument (cap and trade). true or falseImagine a firm with a marginal abatement cost (MAC) function equal to: MAC = 45 - 5E. The government introduces a per-unit tax on emissions equal to $10. For a profit-maximizing firm, total compliance costs (total abatement costs plus tax payment) are $____.
- Suppose that a chemical manufacturing plant is releasing nitrogen oxides into the air, and these emissions are associated with health and ecological damages. Economists have estimated the following marginal costs and benefits for the chemical market, where Q is monthly output in thousands of pounds and P is price per pound. MSB = 50 – 0.4Q; MSC = 2 + 0.4Q; MEB = 0; MEC = 0.2Q. Find the dollar value of a product charge that would achieve an efficient solution.A polluting firm’s marginal abatement cost is MACi = 50 – 0.25ei . If a regulator imposes a per-unit emissions tax of t = 10, what level of emissions does the firm choose under the tax? A polluting firm’s marginal abatement cost is MACi = 50 – 0.25ei . If a regulator imposes a per-unit emissions tax of t = 10, how many units did the firm abate relative to the unregulated environment?Attached is the marginal abatement costs of three firms, related to the quantity of emissions. Each firm is now emitting 10 tons per week, so total emissions are 30 tons per week. Suppose we wish to reduce emissions by 50 percent, to 15 tons per week. Compare the total cost of doing this: (a) with an equi-proportionate decrease in emissions (b) with a decrease that meets the equi-marginal principle.
- The main disadvantage of an emissions tax is that .... differences among firms are not incorporated into the policy firms lack the flexibility to pursue different technologies firms cannot behave in an economically-efficient manner. firms do not have the incentive to reduce pollution. the total pollution reduction from an emissions tax cannot be known for sure.Suppose that a firm's marginal abatement cost function with existing technologies is MAC = 18 - 2E. If the firm adopts new pollution abatement technologies, then its marginal abatement cost function will become MAC = 9 - E. With an emissions tax of $4, the benefits of adopting the new technologies are $____.Consider the following model of a hypothetical market for MSW management services: MPB = 25 − 2Q MPC = 4 + Q MEC = 0.5Q, where Q is the number of trash containers per household per month. A. Quantitatively determine the effect of the resource misallocation due to: the presence of the negative externality, and the use of a flat fee pricing system in the presence of a negative externality. B. Determine the dollar value of a waste-end charge that would restore efficiency to this market. Explain your answer intuitively.
- Efficiency losses _______________. a. Are not possible if suppliers are willing to produce and sell a product.b. Can only result from underproduction.c. Can only result from overproduction.d. None of the above.If there are externalities leading to underproduction of a given good, command and control methods become a preferred method over Pigouvian taxes from an einciency perspective. True or False?Suppose that a firm's marginal abatement cost function with existing technologies is MAC = 16 - 2E. If the firm adopts new pollution abatement technologies, then its marginal abatement cost function will become MAC = 8 - E. If the government raises the emissions tax from $2 to $3, then the benefits of adopting the new technologies increase by $____. (Hint: recall that the benefits from adopting new technologies are simply the difference in total compliance costs.) THE ANSWER IS NOT 2 or 1.75 Might be 1.25 or 4.50
