The Government of Yokuku considers applying one of the following policies: a tax or a standard, in order to reduce pollution level from P to Po. The government economist drew the following graph, representing the marginal abatement cost (MAC) to the polluters, the marginal damage to the society (MD), the optimal tax level (Tax level) and the socially optimal pollution level (Po). 1.1 What is the total damage cost under the standard policy?
The Government of Yokuku considers applying one of the following policies: a tax or a standard, in order to reduce pollution level from P to Po. The government economist drew the following graph, representing the marginal abatement cost (MAC) to the polluters, the marginal damage to the society (MD), the optimal tax level (Tax level) and the socially optimal pollution level (Po). 1.1 What is the total damage cost under the standard policy?
Chapter19: Externalities And Public Goods
Section: Chapter Questions
Problem 19.9P
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The Government of Yokuku considers applying one of the following policies: a tax or a standard, in order to reduce pollution level from P to Po.
The government economist drew the following graph, representing the marginal abatement cost (MAC) to the polluters, the marginal damage to the society (MD), the optimal tax level (Tax level) and the socially optimal pollution level (Po).
1.1 What is the total damage cost under the standard policy?
- A
- B
- A+B
- A+B+C
1.2 What is the total tax cost under the standard policy?
- There is no tax cost under the standard policy
- B
- C
- B+C
1.3 What is the total tax cost under the tax policy?
- There is no tax cost under the tax policy
- B
- C
- B+C
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