Principles Of Economics, Ap Edition, 9781337292603, 1337292605, 2018
8th Edition
ISBN: 9781337292603
Author: Mankiw
Publisher: Cengage Learning (2018)
expand_more
expand_more
format_list_bulleted
Question
Chapter 11, Problem 10PA
To determine
Cost benefit analysis.
Expert Solution & Answer
Trending nowThis is a popular solution!
Students have asked these similar questions
To evaluate potential policy options that address emissions and climate change, economists often recommend a thorough cost-benefit analysis, in which the avoided environmental and human health damages are weighed against the["marginal abatement costs", "marginal abatement benefits"] .
Most estimates by environmental economists suggest that the benefits of emission reduction are somewhere between 5-20% of world GDP, while the costs are between 1-4%. Using a cost-benefit analysis, this would imply that these policies ["should", "should not"] be implemented.
The resulting policies can take the form of ["preventive", "adaptive"] strategies, those that reduce damages resulting from climate change, or ["preventive", "adaptive"] strategies that reduce emissions.
a) If the total benefits to society of achieving some specific level of pollution control aresignificantly greater than the total costs to society of doing so, will it necessarily beeconomically efficient (socially optimal) to do so? Explain your answer with words and agraph.b) In March 2011, the US EPA issued a report that looked at the results of the Clean Air Actfrom 1990 to 2020 (see: http://www.epa.gov/air/sect812/prospective2.html). This reviewfound that in the central estimate of the CAA’s impact, benefits exceeded costs by a ratio of30 to 1. This leads some environmental policy commentators to conclude that the EPA hadnot gone far enough in reducing air pollution. Under what conditions would a benefit costratio of 30:1 imply that it would be economically efficient to further reduce air pollutionunder the CAA? Assuming the EPA’s benefit-cost estimate is correct, is it possible that itcould actually be economically efficient to loosen, rather than strengthen, air…
Suppose the marginal cost of pollution abatement is constant and equal to 10 percent of GDP for each 10 percent increase in pollution
control Given the following data for a $10 trillion economy, answer two questions,
Level of Pollution
Abatement (%)
0 (no pollution control)
10
20
30
40
50
60
70
80
90
100 (zero emissions)
Marginal Benefit
($ trillions)
2.0
1.7
1.3
1.0
08
06
04
03
02
0.1
Instructions: Enter your responses based on the percentage values provided in the table
a. Identify the optimal rate of pollution abatement
Now suppose that the marginal costs of pollution abatement decrease to 6 percent of GDP for each 10 percent increase in pollution
control because of improved pollution control technology and more efficient sources of renewable energy
b. Identify the new optimal rate of pollution abatement
%
Chapter 11 Solutions
Principles Of Economics, Ap Edition, 9781337292603, 1337292605, 2018
Knowledge Booster
Similar questions
- Suppose that speeding imposes externalities on other people resulting in a social cost of $50. A town is considering hiring an extra police officer to give out speeding tickets. If we want to maximize social welfare (absent enforcement costs), which of the following statements are true? (Assume risk neutral drivers.) What happens to the socially optimal cost of the speeding ticket if the town decides to hire the police officer? a) It goes down b) It goes up c) The amount that it goes down depends on salary of the police officer d) The amount if goes up depends on the salary of the police officer e) None of the abovearrow_forwardQuestions 1-4 The Alpha, Beta, and Gamma residents of a village are install street lights along the main street of the village The marginal benefit (Am) of the streetlights is: - Alpha: Am = 10.000-80x. - Beta: Am = 8.000-90x. - Gamma: Am = 14.000-70x 1. If a streetlight costs $8,000, what is the optimal collective number of streetlights? а. 25. b. 65. с. 100 d. 110 2. What is the marginal benefit of Alpha at the optimal number of street lights? а. О. b. 2,000 с. 3,500. d. 4,500. 3. What is the marginal benefit of Gamma at the optimal number of street lights? а. О. b. 6,000. с. 7,000 d. 9,000 4. How will Citizen Beta react to the proposal to levy a flat tax of $5,000 per citizen per streetlight to fund the development of streetlights? He a. Will be willing to pay the tax. b. will refuse to pay the tax. c. is unable to conclude whether Beta will be willing to pay the tax or not. d. will be indifferent to the "neither for nor against" street lights.arrow_forwardPlants A and B emit 12 tons and 6 tons of carbon dioxide (CO2), respectively. MAC(marginal abatement costs) for a = 12 - Ea, MACb=12-2Eb MD(marginal damage) = 1/3*E (E indicates CO2 emission) What is the social optimum for power plants A and B to reduce CO2 by some amount, and how much reduction cost each power plant bears?arrow_forward
- Q) Imagine any number of identical boats can fish along the North Carolina coast. The value of fishing (V) per boat as a function of the number of boats (N) is: V = 50 − 5N. The marginal value (MV) to the fishery of an additional boat is: MV = 50 − 10N. For each boat, the costs of fishing (C) are $10. If the fishery were managed in a way that only the socially efficient # of boats are allowed to enter the fishery, what would be the net value (i.e., total value minus total costs) of the fishery? Explain it early. Not solve in excel worksarrow_forwardQ) Imagine any number of identical boats can fish along the North Carolina coast. The value of fishing (V) per boat as a function of the number of boats (N) is: V = 50 − 5N. The marginal value (MV) to the fishery of an additional boat is: MV = 50 − 10N. For each boat, the costs of fishing (C) are $10. If the fishery were managed in a way that only the socially efficient # of boats are allowed to enter the fishery, what would be the net value (i.e., total value minus total costs) of the fishery? Solve it early. Not in excelarrow_forwardQ) Imagine any number of identical boats can fish along the North Carolina coast. The value of fishing (V) per boat as a function of the number of boats (N) is: V = 50 − 5N. The marginal value (MV) to the fishery of an additional boat is: MV = 50 − 10N. For each boat, the costs of fishing (C) are $10. If the fishery were managed in a way that only the socially efficient # of boats are allowed to enter the fishery, what would be the net value (i.e., total value minus total costs) of the fishery? Correctly explain now. Not in excelarrow_forward
- It’s common to think that reducing pollution is necessarily costly because to reduce pollution we need to tax firms who will then produce less. But can you think of one example in which pollution might not only be unpleasant but might actually reduce production?arrow_forwardNational defense is a good that is nonexcludable and nonrival in consumption. Suppose that instead of national defense being paid for with tax dollars national defense is paid for by voluntary contributions from (potentially) all individuals within Latvia Bob, who is a Latvian citizen, must decide whether he wants to contribute to the national-defense budget. Further, suppose that there are a total of 10 citizens, including Bob. For the optimal amount of safety, each citizen should pay $10. Every $ contributed (by anyone) to the national defense leads to increased security, which each person values at $0.40. This means that every dollar spent on defense is worth $4.00 to Latvia as a whole How much does Bob personally value the increase in national defense when he contributes $10 to the defense fund? Bob's personal value: $ If contributions are voluntary, and assuming people rationally maximize their utility, what is the total contributed to national defense? total contributed…arrow_forwardA company near a large city is required to keep its smokestack pollution to new lower levels, costing the company $2 million in additional equipment (which will last at least 10 years) and $100,000 a year in additional labor. Lowering the air pollutants in the region is expected to save $4 million in medical expenses in the affected region over the next 10 years. What level of pollution reduction gives the smallest benefit for money spent? Select one: a. From 1-20% of pollution reduction b. From a 20-40% pollution reduction c. From a 80-100% pollution reduction d. From a 60-80% pollution reductionarrow_forward
- 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 social cost under tax policy? A+2B+C A+B B+C A+B+C 1.2 What is the total social cost under standard policy? A+2B+C A+B B+C A+B+C 1.3 Which environmental policy is more socially efficient? Tax Standard Both tax and standard policies are equally efficientarrow_forwardBN8.3 Case Three Neighboring Towns - Marshland, Dampland, & Wetland - all border the same Lake. The Lake frequently floods causing damage to property in all 3 Towns. Each Town would benefit from Flood Mitigation, but the Level of Benefits differs. With Z representing the Level of Mitigation: for Marshland, MB = 3-Z for Dampland, MB = 4-2Z for Wetland, MB = 11-Z The marginal cost of flood mitigation is MC = 2 + 12Z Questions: (a) What is the Socially Optimal Level of Z? (b) What would each Individual Town be willing to Pay for this Level of Flood Mitigation? (c) The Representative from Wetland proposes that each Town Pay an equal share for the Optimal Level of Flood Mitigation. Would this Pricing Strategy work?arrow_forwardAnalyze the situation below and give your responses: The situation: If you live in a place that presently not requiring car drivers not wearing a seatbelt. In addition, considering that you enjoy driving your car without using seatbelt. From your own perspective/opinion, state at least one major cost and benefit of a government proposed ordinance/ a law to abide that would require all drivers to wear seatbelts? 1) Cost: 2) Benefit:arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Essentials of Economics (MindTap Course List)EconomicsISBN:9781337091992Author:N. Gregory MankiwPublisher:Cengage Learning
Essentials of Economics (MindTap Course List)
Economics
ISBN:9781337091992
Author:N. Gregory Mankiw
Publisher:Cengage Learning