Table 1 shows the demand schedule for electricity from a coal burning utility. Table 2 shows the utility's cost of producing electricity and the external cost of the pollution created. With no pollution control, calculate the quantity of electricity produced, the price of electricity, and the marginal external cost of the pollution generated. With no pollution control, the quantity of electricity produced is The price of electricity is cents a kilowatt. kilowatts a day. Table 1 Table 2 Price (cents per kilowatt) 4 8 12 16 20 24 Quantity (kilowatts per day) 0 100 200 300 400 500 Marginal cost 0 2 4 6 8 10 Quantity demande (kilowatts per day) 500 400 300 200 100 0 Marginal external cost (cents per kilowatt) 0 2 4 6 8 10

Table 1 shows the demand schedule for electricity from a coal burning utility. Table 2 shows the utility's cost of producing electricity and the external cost of the pollution created. With no pollution control, calculate the quantity of electricity produced, the price of electricity, and the marginal external cost of the pollution generated. With no pollution control, the quantity of electricity produced is The price of electricity is cents a kilowatt. kilowatts a day. Table 1 Table 2 Price (cents per kilowatt) 4 8 12 16 20 24 Quantity (kilowatts per day) 0 100 200 300 400 500 Marginal cost 0 2 4 6 8 10 Quantity demande (kilowatts per day) 500 400 300 200 100 0 Marginal external cost (cents per kilowatt) 0 2 4 6 8 10

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter12: Environmental Protection And Negative Externalities

Section: Chapter Questions

Problem 42P: Table 12.12, shows the supply and demand conditions for a firm that will play trumpets on the...

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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?
Identify the following situations as an example of a negative or a positive externality: You are a birder (bird watcher), and your neighbor has put up several birdhouses in the yard as well as planting trees and flowers that attract birds. Your neighbor paints his house a hideous color. Investments in private education raise your countrys standard of living. Trash dumped upstream flows downstream right past your home. Your roommate is a smoker, but you are a nonsmoker.
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?
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?
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.
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.